UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
- - --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994 or
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
- - --- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-1023
McGRAW-HILL, INC.
- - ---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-1026995
- - ---------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1221 AVENUE OF THE AMERICAS, NEW YORK, N.Y. 10020
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 512-2000
------------------
Not Applicable
- - ---------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
YES X NO
----------- -----------
Number of shares of Common Stock (par value $1.00 per share)
outstanding as of July 29, 1994: 49,555,001.
PART I
Financial Information
McGraw-Hill, Inc.
-----------------
Consolidated Statement of Income
--------------------------------
Periods Ended June 30, 1994 and 1993
------------------------------------
Three Months Six Months
-------------------- ----------------------
1994 1993 1994 1993
--------- --------- ---------- ---------
(In thousands, except per-share data)
Operating revenue $ 648,279 $ 490,907 $1,208,053 $ 957,854
Expenses:
Operating 321,643 248,563 617,497 494,083
Selling and general 237,647 177,532 467,988 346,801
--------- --------- ---------- ---------
Total expenses 559,290 426,095 1,085,485 840,884
Share of profit/(loss) of
Macmillan/McGraw-Hill
joint venture (Note 3) - 11,232 - (9,113)
Other income - net 5,411 3,516 8,634 6,516
--------- --------- ---------- ---------
Income from operations 94,400 79,560 131,202 114,373
Interest expense - net (12,698) (7,812) (24,046) (16,011)
--------- --------- ---------- ---------
Income before taxes on income 81,702 71,748 107,156 98,362
Provision for taxes on income 33,661 28,571 44,148 39,935
--------- --------- ---------- ---------
Net income $ 48,041 $ 43,177 $ 63,008 $ 58,427
========= ========= ========== =========
Earnings per common share $ 0.97 $ 0.88 $ 1.27 $ 1.19
========= ========= ========== =========
Average number of common
shares outstanding 49,442 48,983 49,441 49,067
-2-
Financial Information (cont'd)
McGraw-Hill, Inc.
-----------------
Consolidated Balance Sheet
--------------------------
June 30, Dec. 31, June 30,
1994 1993 1993
---------- ---------- ----------
(In thousands)
ASSETS
Current assets:
Cash and equivalents $ 12,995 $ 47,953 $ 13,893
Accounts receivable (net of allowance
for doubtful accounts) (Note 4) 694,536 711,919 513,536
Receivable from broker-dealers and
dealer banks (Note 5) 52,770 19,136 23,665
Inventories (Note 4) 266,387 215,228 118,041
Prepaid income taxes 92,585 92,912 42,947
Prepaid and other current assets 40,841 44,634 35,068
---------- ---------- ----------
Total current assets 1,160,114 1,131,782 747,150
---------- ---------- ----------
Prepublication costs (net of accumulated
amortization) (Note 4) 297,923 285,445 95,982
Investments and other assets:
Investment in Macmillan/McGraw-Hill
School Publishing Company - at
equity (Note 3) - - 499,921
Investment in Rock-McGraw, Inc. - at
equity 55,210 53,077 51,807
Prepaid pension expense 93,175 87,655 82,392
Other 152,880 159,861 148,278
---------- ---------- ----------
Total investments and other assets 301,265 300,593 782,398
---------- ---------- ----------
Property and equipment - at cost 748,369 753,452 634,253
Less - accumulated depreciation 418,204 408,126 358,657
---------- ---------- ----------
Net property and equipment 330,165 345,326 275,596
Goodwill and other intangible assets - at
cost (net of accumulated amortization) 999,606 1,021,017 547,357
---------- ---------- ----------
$3,089,073 $3,084,163 $2,448,483
========== ========== ==========
-3-
Financial Information (cont'd)
McGraw-Hill, Inc.
-----------------
Consolidated Balance Sheet
--------------------------
June 30, Dec. 31, June 30,
1994 1993 1993
---------- ---------- ----------
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 174,931 $ 170,780 $ 122,764
Accounts payable 176,324 178,466 124,427
Payable to broker-dealers and dealer
banks (Note 5) 51,719 18,695 16,937
Accrued liabilities 131,927 182,156 102,201
Income taxes currently payable 73,851 42,783 53,264
Unearned revenue 235,975 248,036 233,573
Other current liabilities 221,859 227,979 148,563
---------- ---------- ----------
Total current liabilities 1,066,586 1,068,895 801,729
---------- ---------- ----------
Other liabilities:
Long-term debt (Note 6) 757,932 757,567 333,339
Deferred income taxes 114,812 119,548 109,701
Accrued postretirement healthcare and
other benefits 192,365 190,985 188,049
Other non-current liabilities 118,594 124,160 102,726
---------- ---------- ----------
Total other liabilities 1,183,703 1,192,260 733,815
---------- ---------- ----------
Total liabilities 2,250,289 2,261,155 1,535,544
---------- ---------- ----------
Shareholders' equity (Note 7):
Capital stock 51,474 51,475 51,475
Additional paid-in capital 67,016 63,512 59,520
Retained income 840,022 834,250 937,289
Foreign currency translation adjustments (26,390) (28,577) (24,480)
---------- ---------- ----------
932,122 920,660 1,023,804
Less - common stock in treasury-at cost 82,570 87,687 99,675
unearned compensation on
restricted stock 10,768 9,965 11,190
---------- ---------- ----------
Total shareholders' equity 838,784 823,008 912,939
---------- ---------- ----------
$3,089,073 $3,084,163 $2,448,483
========== ========== ==========
-4-
Financial Information (cont'd)
McGraw-Hill, Inc.
-----------------
Consolidated Statement of Cash Flows
------------------------------------
For The Six Months Ended June 30, 1994 And 1993
-----------------------------------------------
1994 1993
---------- ----------
(In thousands)
Cash flows from operating activities
- - ------------------------------------
Net income $ 63,008 $ 58,427
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation 31,161 25,204
Amortization of goodwill and intangibles 19,072 11,718
Amortization of prepublication costs 42,553 17,744
Provision for losses on accounts receivable 34,014 37,339
Share of loss of and distribution from
Macmillan/McGraw-Hill joint venture - 11,171
Other (753) 131
Changes in assets and liabilities net of effect of
acquisitions and dispositions:
(Increase)/decrease in accounts receivable (18,562) 36,453
Increase in inventories (51,011) (23,901)
Decrease in accounts payable and accrued expenses (52,687) (32,101)
Increase in interest and income taxes payable 31,361 15,077
Net change in other assets and liabilities (14,485) (16,512)
- - --------------------------------------------------- ---------- ----------
Cash provided by operating activities 83,671 140,750
- - --------------------------------------------------- ---------- ----------
Investing activities
- - --------------------
Purchases of property and equipment (21,788) (17,158)
Investment in prepublication costs (55,821) (22,018)
Disposition of property and equipment 4,680 787
Acquisition of businesses and equity interests (309) (20,071)
Other 2,655 -
- - --------------------------------------------------- ---------- ----------
Cash used for investing activities (70,583) (58,460)
- - --------------------------------------------------- ---------- ----------
Financing activities
- - --------------------
Dividends paid to shareholders (57,236) (55,780)
Additions to/(repayment of) short-term
debt-net 3,864 (26,754)
Other 5,326 909
- - --------------------------------------------------- ---------- ----------
Cash used for financing activities (48,046) (81,625)
- - --------------------------------------------------- ---------- ----------
Net change in cash and equivalents (34,958) 665
Cash and equivalents at beginning of period 47,953 13,228
- - --------------------------------------------------- ---------- ----------
Cash and equivalents at end of period $ 12,995 $ 13,893
========== ==========
-5-
Financial Information (cont'd)
McGraw-Hill, Inc.
-----------------
Notes to Financial Statements
-----------------------------
1. The financial information in this report has not been audited, but in the
opinion of management is based on estimates which include all adjustments
(consisting only of normal recurring adjustments) considered necessary to
present fairly such information. The operating results for the three and
six month periods ended June 30, 1994 and 1993, are not necessarily
indicative of results to be expected for the full year due to the seasonal
nature of some of the company's businesses. The financial statements
included herein should be read in conjunction with the financial statements
and notes included in the company's Annual Report on Form 10-K for the year
ended December 31, 1993.
Certain prior year amounts have been reclassified for comparability
purposes.
2. Operating profit by segment is total operating revenue less expenses which
are deemed to be related to the unit's operating revenue. A summary of
operating results by segment for the three months and six months ended June
30, 1994 and 1993 follows:
1994 1993 (Note)
--------------------- ---------------------
Operating Operating
Revenue Profit Revenue Profit
--------- --------- --------- ---------
Three Months (In thousands)
------------
Educational and Professional
Publishing $ 258,818 $ 20,906 $ 118,609 $ 1,278
Financial Services 183,094 53,257 171,179 50,763
Information and Media Services 206,367 33,288 201,119 28,646
-------------------------------- --------- --------- --------- ---------
Total operating segments 648,279 107,451 490,907 80,687
Share of profit of Macmillan/
McGraw-Hill joint venture - - - 11,232
General corporate expense - (13,051) - (12,359)
Interest expense - net - (12,698) - (7,812)
-------------------------------- --------- --------- --------- ---------
Total company $ 648,279 $ 81,702* $ 490,907 $ 71,748*
========= ========= ========= =========
<FN>
*Income before taxes on income.
</FN>
-6-
Financial Information (cont'd)
McGraw-Hill, Inc.
-----------------
Notes to Financial Statements
-----------------------------
1994 1993 (Note)
----------------------- -----------------------
Operating Operating
Revenue Profit/(Loss) Revenue Profit/(Loss)
---------- ------------ --------- ------------
Six Months (In thousands)
----------
Educational and Professional
Publishing $ 435,133 $ (4,027) $ 228,544 $ (366)
Financial Services 377,540 112,039 344,000 102,494
Information and Media Services 395,380 47,760 385,310 44,751
-------------------------------- ---------- --------- --------- ---------
Total operating segments 1,208,053 155,772 957,854 146,879
Share of loss of Macmillan/
McGraw-Hill joint venture - - - (9,113)
General corporate expense - (24,570) - (23,393)
Interest expense - net - (24,046) - (16,011)
-------------------------------- ---------- --------- --------- ---------
Total company $1,208,053 $ 107,156* $ 957,854 $ 98,362*
========== ========= ========= =========
<FN>
*Income before taxes on income.
Note: Revenue and operating profit by segment for the 1993 periods have been
restated to reflect the combining of the Broadcasting and Information and
Publications Services segments and Tower Group International operations into
one segment, Information and Media Services.
</FN>
-7-
Financial Information (cont'd)
McGraw-Hill, Inc.
-----------------
Notes to Financial Statements
-----------------------------
3. On October 4, 1993, the company purchased the additional 50% interest in
the Macmillan/McGraw-Hill School Publishing Company for $337.5 million in
cash. The company now owns 100% of Macmillan/McGraw-Hill and it is
consolidated in McGraw-Hill's operations from the date of acquisition of
the additional 50% interest. Prior to the acquisition of the additional
50% interest, the company accounted for its 50% interest under the equity
method.
The following pro forma information presents the consolidated results of
operations of the company for the three and six month periods ended June
30, 1993 as if the acquisition of the additional 50% of Macmillan/McGraw-
Hill had occurred at the beginning of 1993, after giving effect to certain
adjustments, including amortization of goodwill and other intangibles,
increased interest expense from debt issued to fund the acquisition and
related income tax effects. Pro forma results for the three months are:
operating revenue $670.2 million; net income $48.3 million and earnings per
common share $.98 and for the six months are: operating revenue $1,189.4
million; net income $51 million and earnings per common share $1.04. These
pro forma results are not necessarily indicative of those that would have
occurred had the acquisition taken place at the beginning of 1993.
4. The allowance for doubtful accounts, the components of inventory and the
accumulated amortization of prepublication costs were as follows:
June 30, Dec. 31, June 30,
1994 1993 1993
--------- --------- ---------
(In thousands)
Allowance for doubtful accounts $ 79,201 $ 79,461 $ 80,029
========= ========= =========
Inventories:
Finished goods $ 187,936 $ 166,584 $ 72,361
Work-in-process 57,541 29,259 25,041
Paper and other materials 20,910 19,385 20,639
--------- --------- ---------
Total inventories $ 266,387 $ 215,228 $ 118,041
========= ========= =========
Accumulated amortization of
prepublication costs $ 279,555 $ 282,052 $ 153,324
========= ========= =========
Prepublication costs of $96 million included in inventory at June 30, 1993
have been reclassified to a separate non-current category to conform with
current industry practice.
- 8 -
Financial Information (cont'd)
McGraw-Hill, Inc.
-----------------
Notes to Financial Statements
-----------------------------
5. A subsidiary of J.J. Kenny Co. acts as an undisclosed agent in the purchase
and sale of municipal securities for broker-dealers and dealer banks and
the company had $579.2 million of matched purchase and sale commitments at
June 30, 1994. Only those transactions not closed at the settlement date
are reflected in the balance sheet as receivables and payables.
6. A summary of long-term debt follows:
June 30, Dec. 31, June 30,
1994 1993 1993
--------- --------- ---------
(In thousands)
9.43% senior notes due 2000 $ 250,000 $ 250,000 $ 250,000
Commercial paper supported by
bank revolving credit agreement 500,000 500,000 75,000
Other 7,977 7,930 8,400
--------- --------- ---------
757,977 757,930 333,400
Less: portion included in other
current liabilities 45 363 61
--------- --------- ---------
Total long-term debt $ 757,932 $ 757,567 $ 333,339
========= ========= =========
7. Common shares reserved for issuance, for conversions and for the
exercise of stock options were as follows:
June 30, Dec. 31, June 30,
1994 1993 1993
--------- --------- ---------
$1.20 convertible preference stock
at the rate of 3.3 shares
for each share of preference stock 5,046 5,277 5,293
Exercise of stock options 1,930,568 2,054,087 2,359,309
--------- --------- ---------
1,935,614 2,059,364 2,364,602
========= ========= =========
8. Cash dividends per share declared during the periods were as follows:
Three Months Six Months
------------- -------------
1994 1993 1994 1993
---- ---- ----- -----
Common stock $.58 $.57 $1.16 $1.14
Preference stock .30 .30 .60 .60
-9-
Financial Information (cont'd)
Management's Discussion and Analysis of Operating
--------------------------------------------------
Results and Financial Condition
-------------------------------
Operating Results - Comparing Periods Ended June 30, 1994 and 1993
- - ------------------------------------------------------------------
The company acquired its partner's 50% interest in the Macmillan/
McGraw-Hill School Publishing Company in October 1993. The company now owns
100% of the former joint venture company, renamed the McGraw-Hill School
Publishing Company in 1994. School Publishing's operations are consolidated in
the company's segment results in 1994 in the Educational and Professional
Publishing segment. 1993's results reflect the company's 50% equity share of
the former joint venture's results.
Three Months
- - ------------
Consolidated Review
- - -------------------
Operating revenue for the quarter grew $157.4 million, or 32.1%, to $648.3
million. $132.6 million of the revenue increase reflects the consolidation of
School Publishing. The remainder of the revenue increase reflects increases in
Financial Services, the continued rebound in advertising-based businesses and a
good performance by Shepard's, the company's legal publisher. Net income
increased 11.3% to $48.0 million from $43.2 million reflecting full ownership of
School Publishing, and improved results at Financial Information Services,
Broadcasting and Business Week. Earnings per share were 97 cents versus 88
cents last year.
Total expenses in 1994 increased $133.2 million or 31.3% reflecting the
inclusion of School Publishing. Excluding School Publishing, the company's
expenses increased 4.7% due primarily to volume increases in certain market
focus groups and some cost increases.
Net interest expense increased $4.9 million due primarily to increased
borrowings associated with the acquisition of the additional 50% of the school
publishing joint venture and an increase in the average borrowing rate.
The provision for taxes as a percent of income before taxes was 41.2% in the
1994 quarter and 39.8% in 1993. The increase primarily reflects the increase in
the corporate federal income tax rate from 34% to 35% that was enacted in last
year's third quarter retroactive to January 1, 1993.
-10-
Financial Information (cont'd)
Segment Review
- - --------------
Revenue for the Educational and Professional Publishing segment increased $140.2
million from last year, due largely to the inclusion of School Publishing
revenues of $132.6 million. Revenue increases were also reported by Shepard's
and medical publishing. Internationally, book publishing revenues increased in
Asia and Ibero-America but declined in Canada and Europe. Operating profit for
the segment increased sharply reflecting the inclusion of School Publishing.
School Publishing's revenues declined from last year due to a less favorable
adoption cycle in 1994, but cost containment measures reduced the impact on
profits. Excluding School Publishing, the combined operating results of the
company's other publishing units improved from last year due mainly to the
performance at Shepard's. The company is proceeding with plans to consolidate
certain functions and systems of School Publishing and its other book publishing
operations. This consolidation is expected to generate annual savings of more
than $10 million, which will begin to be realized later in the year.
Financial Services' revenue grew $11.9 million, or 7.0%, and operating profit
increased $2.5 million, or 4.9%, buoyed by an excellent performance from the
Financial Information Services Group. The improved performance was led by
equity investor services, J.J. Kenny evaluations and information services and
MMS International, as well as the continued turnaround at DRI. The S&P Ratings
Group gained in revenue despite a major decline in bond issuance volume.
Planned investments in new products and services reduced the Ratings Group's
profits for the quarter.
Information and Media Services revenue increased $5.2 million, or 2.6%, while
operating profit improved $4.6 million, or 16.2%. A strong performance in
Broadcasting and improved advertising pages at Business Week and several other
publications contributed to the revenue and operating profit increases. Tower
Group International improved as a result of acquisitions and volume increases
while the Construction Information Group' profits declined due to continued soft
market conditions.
Six Months
- - ----------
Consolidated Review
- - -------------------
For the first half of the year, operating revenue of $1.2 billion was $250.2
million, or 26.1%, ahead of 1993. $189.4 million of the revenue increase
reflects the consolidation of School Publishing. Excluding the impact of School
Publishing, revenues increased $60.8 million, or 6.3%. Net income increased
7.8% to $63.0 million from $58.4 million reflecting additional gains in
Financial Services, improved results in Broadcasting and Business Week,
partially offset by softness in Construction. Improved results in School
Publishing offset the incremental impact of recognizing 100% of School
Publishing's first half seasonal loss. Earnings per share were $1.27 versus
$1.19 last year.
-11-
Financial Information (cont'd)
Total expenses in 1994 increased $244.6 million, or 29.1%, reflecting the
inclusion of School Publishing. Excluding School Publishing, expenses increased
6.0% due primarily to volume increases in certain market focus groups and some
cost increases.
Net interest expense increased $8.0 million due primarily to increased
borrowings associated with the acquisition of the additional 50% of the school
publishing joint venture and an increase in the average borrowing rate.
The provision for taxes as a percent of income before taxes was 41.2% in 1994
versus 40.6% in 1993. The 1993 rate does not reflect the increase in the
corporate federal income tax rate from 34% to 35% that was enacted in last
year's third quarter retroactive to January 1, 1993.
Segment Review
- - --------------
Educational and Professional Publishing revenue increased $206.6 million, or
90.4%, due largely to the inclusion of School Publishing revenues of $189.4
million. Revenues for the company's other publishing operations increased $17.2
million, or 7.5%, led by Shepard's and medical publishing. The segment's
operating loss increased $3.7 million to $4.0 million due to the seasonal loss
of School Publishing. Despite School Publishing's decline in revenue resulting
from the less favorable adoption cycle in 1994, operating results improved
reflecting reduced costs from actions taken last year. School Publishing's
improved year to year performance offset the impact of absorbing the full
seasonal loss for the first half of the year. Excluding School Publishing, the
combined operating results of the company's other publishing units improved
slightly from last year.
Financial Services' revenue increased $33.5 million, or 9.8%, and operating
profit increased $9.5 million, or 9.3%. Increased activity in the high yield
bond market in the first quarter and greater penetration in international
markets and new ratings initiatives benefitted the S&P Debt Rating Group.
Financial Information Services showed gains at equity investor services, J.J.
Kenny evaluations and information services and MMS International.
Information and Media Services revenue increased $10.1 million, or 2.6%, and
operating profit improved $3.0 million, or 6.7%. Strong performances in
Broadcasting, Business Week and Tower Group International offset declines in the
Construction Information Group.
-12-
Financial Information (cont'd)
Financial Condition - June 30, 1994 versus December 31, 1993
- - ------------------------------------------------------------
The company continues to maintain a strong financial position with cash flow
from operations of $84 million. Cash flow from operations declined from
$141 million last year, reflecting the seasonal impact of the School Publishing
business. Total debt was $932.9 million, an increase of $4.2 million from year-
end.
Commercial paper borrowings at June 30, 1994 totaled $666.5 million, a decline
of $1.2 million from December 31, 1993. Commercial paper debt is supported by a
$500 million revolving credit agreement with a group of banks terminating in
November 1997, and $500 million has been classified as long-term. The company
has two other revolving credit agreements that terminate in 1994 totaling $350
million. There are no amounts outstanding under these agreements.
Under a shelf registration which became effective with the Securities and
Exchange Commission in mid-1990, the company can issue an additional $250
million of debt securities. The new debt could be used to replace a portion of
the commercial paper borrowings with longer term securities, when and if
interest rates are attractive and markets are favorable.
Accounts receivable before reserves of $773.7 million decreased $17.6 million
from the end of 1993, due primarily to the seasonal nature of some of the
company's businesses. Receivables were $180.2 million higher than at June 30,
1993, as a result of the inclusion of School Publishing in 1994 and increased
receivables reflecting higher revenues than a year ago.
Inventories increased $51.2 million to $266.4 million from the end of 1993 due
to the seasonal requirements for School Publishing and the seasonal buildup for
the annual Sweet's Files. Inventories were $148.3 million higher than at June
30, 1993 as a result of the inclusion of School Publishing in 1994.
Net prepublication costs at June 30 increased $12.5 million to $297.9 million
primarily due to additional spending on new titles and school programs net of
year to date amortization expense. 1994 prepublication cost investment totaled
$55.8 million, an increase of $33.8 million reflecting School Publishing
spending. Net prepublication costs were $201.9 million higher than at June 30,
1993 as a result of the inclusion of School Publishing in 1994.
Purchases of property and equipment during the first six months totaled $21.8
million, primarily for computer equipment for the market focus groups.
-13-
Part II
Other Information
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
(a) The 1994 Annual Meeting of Shareholders of the Registrant was held on
April 27, 1994.
(b) The following nominee, having received the FOR votes set forth opposite
her name, constituting a plurality of the votes cast at the Annual
Meeting for the election of Directors, was duly elected a director of
the Registrant for a two-year term:
DIRECTOR FOR WITHHOLD AUTHORITY
-------- --- ------------------
Linda Koch Lorimer 45,388,159 130,882
The following nominees having received the FOR votes set forth
opposite their respective names, constituting a plurality of the votes
cast at the Annual Meeting for the election of Directors, were duly
elected Directors of the Registrant for three-year terms:
DIRECTOR FOR WITHHOLD AUTHORITY
-------- --- ------------------
Vartan Gregorian 45,379,249 139,798
John T. Hartley 45,386,049 132,998
Peter O. Lawson-Johnston 45,384,339 134,708
Paul J. Rizzo 45,384,595 134,452
James H. Ross 45,380,611 138,436
The terms of office of the following directors continued after the
meeting: Joseph L. Dionne, Don Johnston, Harold McGraw III, Alva O.
Way, George B. Harvey, Richard H. Jenrette, John L. McGraw and Lois
Dickson Rice.
(c) Shareholders ratified the appointment of Ernst & Young as independent
auditors for the Registrant and its subsidiaries for 1994. The vote
was 45,381,999 shares FOR and 59,695 shares AGAINST, with 77,203 shares
abstaining and no broker nonvotes.
-14-
Other Information (cont'd)
Item 6. Exhibits and Report on Form 8-K
----------------------------------------
a) Exhibits
--------
(12) Computation of ratio of earnings to fixed charges.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
McGRAW-HILL, INC.
--------------------------------
Date: 8/10/94 By Robert J. Bahash
------------------ ------------------------------
Robert J. Bahash
Executive Vice President
and Chief Financial Officer
Date: 8/10/94 By Thomas J. Kilkenny
------------------ ------------------------------
Thomas J. Kilkenny
Vice President and Controller
Date: 8/10/94 By Robert N. Landes
------------------ ------------------------------
Robert N. Landes
Executive Vice President,
Secretary and General Counsel
-15-
Exhibit (12)
McGraw-Hill, Inc.
-----------------
Computation of Ratio of Earnings to Fixed Charges
-------------------------------------------------
Periods Ended June 30, 1994
----------------------------
Six Twelve
Months Months
--------- ---------
(In thousands)
Earnings
Earnings from continuing operations
before income tax expense and unusual
charges in 1993 (a) (b)............... $ 104,647 $ 300,578
Fixed charges........................... 41,839 78,109
Capitalized interest.................... (187) (443)
--------- ---------
Total Earnings....................... $ 146,299 $ 378,244
========= =========
Earnings from continuing operations
before income tax expense (b)......... $ 104,647 $ 70,778
Fixed charges........................... 41,839 78,109
Capitalized interest.................... (187) (443)
--------- ---------
Total Earnings....................... $ 146,299 $ 148,444
========= =========
Fixed Charges (b)
Interest expense........................ $ 25,789 $ 50,631
Portion of rental payments deemed to be
interest.............................. 16,050 27,478
--------- ---------
Total Fixed Charges.................. $ 41,839 $ 78,109
========= =========
Ratio of Earnings to Fixed Charges
Before unusual charges 3.5x 4.8x
After unusual charges 3.5x 1.9x
<FN>
- - ------------
(a) Unusal charges in 1993 totaled $229.8 million before taxes in connection
with the purchase of 50% interest in the Macmillan/McGraw-Hill School
Publishing Company owned by Macmillan for $337.5 million in cash. The
unusual charges consisted of $199.8 million primarily to adjust the
company's original investment to values established in this transaction.
This charge has been allocated primarily to goodwill and other
intangibles. In addition, the company recorded a provision of $30
million relating to the consolidation of certain functions and systems of
Macmillan/McGraw-Hill and the company's book publishing operations.
(b) For purposes of computing the ratio of earnings to fixed charges,
"earnings from continuing operations before income taxes" excludes
undistributed equity in income of less than 50%-owned companies. "Fixed
charges" consist of (1) interest on debt and capital leases, (2) the
portion of the company's rental expense deemed representative of the
interest factor in rental expense, and (3) the company's proportionate
share of such fixed charges of the Macmillan/McGraw-Hill joint venture
through September 30, 1993.
</FN>
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