Exhibit 99
The McGraw-Hill Companies Reports Another Year of Solid Growth
Earnings Per Share of $3.58 for 2003 and $0.83 for Fourth Quarter
Top First Call Mean Estimate for Full Year and Fourth Quarter
NEW YORK, Jan. 27 /PRNewswire-FirstCall/ -- The McGraw-Hill Companies
(NYSE: MHP) today reported diluted earnings per share for 2003 of $3.58,
including the disposition of the Corporation's headquarters building and the
after-tax impact of discontinued operations (which include a $0.30 after-tax
gain on the divestiture of S&P ComStock and a $0.30 after-tax loss based on
the planned disposition of the juvenile retail publishing business).
Comparable diluted earnings per share for 2002 were $2.96.
Diluted earnings per share from continuing operations on a GAAP basis for
2003, which include an after-tax gain of $0.30 from the sale of real estate,
were $3.58. Excluding the gain from real estate of $0.30, the diluted
earnings per share were $3.28, which beat the First Call mean estimate for the
year of $3.20.
Net income for 2003 increased 19.2% to $687.7 million.
Revenue for 2003 increased 4.0% to $4.8 billion.
Diluted earnings per share for the fourth quarter of 2003 were $0.83,
reflecting an after-tax gain of $0.30 from the sale of its 45% interest in the
Corporation's headquarters building in New York City and a $0.29 after-tax
loss on discontinued operations related to the planned disposition of the
juvenile retail publishing business. The comparable diluted earnings per
share for the fourth quarter of 2002 were $0.69.
Diluted earnings per share from continuing operations on a GAAP basis,
which include an after-tax gain of $0.30 from the sale of real estate, were
$1.12. Excluding the $0.30 after-tax gain on the sale of real estate, diluted
earnings per share were $0.82 for the fourth quarter, which topped the First
Call mean estimate of $0.75.
Reflecting the gain on the sale of real estate and the loss on the planned
disposition of the juvenile retail publishing business, net income for the
fourth quarter grew by 18.6% to $159.9 million.
Revenue in the fourth quarter increased by 7.1% to $1.2 billion.
"A record fourth quarter by Standard & Poor's capped another successful
year in Financial Services," said Harold McGraw III, chairman, president and
chief executive officer of The McGraw-Hill Companies. "A solid year-end
performance in the college and university market, gains in foreign exchange
and rigorous cost controls also contributed to another year of growth and
improvement in our ongoing operating margin to 22.8%.
Financial Services: "In 2003, revenue for this segment grew by 13.7% to
$1.8 billion and operating profit increased 19.0% to $667.6 million. Included
in income from operations for 2002 is the performance of MMS International,
which was divested in September 2002. On a comparative basis, the absence of
MMS International reduced operating revenue by 1.9% and had a negligible
impact on operating profit for the year. The ongoing operating margin for
Financial Services increased to 37.7% from 36.1%.
"In the fourth quarter, revenue grew 21.3% to $494.3 million while
operating profit climbed by 21.8% to $179.4 million.
"Foreign exchange contributed $12.9 million to growth in revenue and
$6.7 million to operating profit in the fourth quarter.
"Standard & Poor's turned in a very strong performance in public debt
markets around the world and benefited from a rebounding U.S. equity market.
International ratings accounted for approximately 33% of ratings revenue in
2003 and grew even faster than the domestic operations.
"Following the usual seasonal pattern, structured financing completed a
very strong year with a surge of business in the fourth quarter. The
residential mortgage-backed market, robust all year, finished on an upswing as
issuers rushed to get deals wrapped up before year-end.
"Asset-backed business, buoyed by the continued strengthening of the
economy, was also strong in the fourth quarter.
"Corporates, stimulated by refinancing and a soaring high-yield market,
produced the strongest performance of the year in the fourth quarter. Public
finance ratings finished the year with a modest gain in the fourth quarter.
"Non-traditional ratings also contributed to the record performance as
bank loan ratings and counterparty ratings grew even faster than many
traditional ratings.
"New issue dollar volume rose in the United States and European bond
markets in the fourth quarter compared to the same period last year, according
to Securities Data Corporation and Harrison Scott Publications.
"In the U.S., new issue dollar volume increased 21.1% in the fourth
quarter. Corporate issuance was up 30.1%. Public finance fell by 19.0%.
Mortgage-backed issuance climbed by 47.1%, while asset-backed issuance grew by
14.1%.
"In Europe, new issue dollar volume increased by 64.8%.
"Standard & Poor's index products and services produced another solid
quarter. Assets under management in Exchange-Traded Funds based on the S&P
indexes climbed to $79.8 billion at the end of 2003, a 26.3% increase over
year-end 2002. Option contracts based on S&P indexes grew by 12.5% in the
fourth quarter at the Chicago Board Options Exchange.
"Revenue for brokerage information products softened, but the pipeline of
new business started to improve in the fourth quarter as Wall Street firms
continued to recover.
"Sales of valuation services picked up in the fourth quarter, reflecting
more merger and acquisition activity and greater focus on non-valuation
services such as litigation support and real estate.
Education: "In 2003, excluding the juvenile retail publishing business,
revenue for this segment increased 0.5% to $2.3 billion while ongoing
operating profit declined 3.4% to $321.8 million. The operating margin
declined to 14.1% from 14.6%.
"In the fourth quarter, revenue for McGraw-Hill Education increased 1.4%
to $495.5 million and ongoing operating profit improved by 1.9% to
$40.0 million.
"Foreign exchange contributed growth of $6.6 million to fourth quarter
revenue and $1.3 million to operating profit.
"The McGraw-Hill Higher Education, Professional and International Group's
revenue grew by 1.5% to $1.1 billion in 2003. For the fourth quarter, revenue
for the group increased 2.4% to $312.7 million.
"The McGraw-Hill School Education Group's revenue declined by 0.4% to
$1.2 billion in 2003. For the fourth quarter, revenue for this group was off
0.2% to $182.8 million.
"A substantial increase in December orders for second semester classes
cemented another year of growth in the U.S. college market for our Higher
Education, Professional and International Group. Growth in science,
engineering, math, the humanities, social science and world languages offset a
low-point in the revision cycle for our business and economics titles.
Leading-edge technology products and services, including a burgeoning array of
web-based instructional materials, played a key role in our performance.
"Sales of Higher Education titles abroad enabled the Higher Education
Professional and International Group to show gains in all overseas markets
except Latin America for the year.
"Professional Publishing titles showed weakness again in the fourth
quarter, reflecting a year-long decline in the computer and technology market.
"A broad lineup of academic and non-academic products was key to the
McGraw-Hill School Education Group's performance. There were solid gains in
science, social studies, reading and testing. We won one of the largest open
territory reading adoptions in 2003 with Open Court Reading in Anne Arundel
County, Maryland (approximately $5 million) and the largest open territory
math adoption on record with Everyday Math and Impact Mathematics in New York
City (more than $20 million). Home economics, business and career education
programs all produced leading market shares. But a 7% capture rate in the
Texas elementary social studies adoption and a less favorable new product
cycle in the secondary market for us in 2003 as compared to 2002 all had an
impact on our results.
"We are also beginning to see a positive impact on our business from the
No Child Left Behind Act, the landmark federal legislation of 2001. Funds
reached the market in 2003 more slowly than originally anticipated, but some
of the success recorded in the fourth quarter of 2003 by Open Court Reading
and Reading Mastery -- programs that closely match guidelines for the Reading
First program -- was attributable to the federal stimulus. In testing, we
benefited from the growing market potential created by the No Child Left
Behind Act's accountability provisions, which require states to administer
annual assessments to all children in grades 3 through 8 starting in the
2005-2006 school year. As a result, our custom business expanded as states
started preparing to meet the new testing requirements. We also benefited
from mandatory assessments required for the new Reading First programs.
Information and Media Services: "In 2003, revenue for this segment
declined 4.6% to $772.6 million and operating profit decreased 7.0% to $109.8
million compared to 2002. The operating margin slipped to 14.2% from 14.6% in
2002.
"In the fourth quarter, revenue for the segment was off 5.1% to
$232.6 million and operating profit declined 10.3% to $53.6 million.
"For the Business-to-Business Group, which includes BusinessWeek,
construction, energy, aviation and healthcare products and services, softness
in advertising played a significant role in the 4.4% decline in revenue to
$669.6 million for 2003. Business-to-Business Group revenue for the fourth
quarter was off 4.1% to $204.7 million.
"At Broadcasting, revenue for 2003 decreased 5.7% to $103.0 million. In
the fourth quarter, revenue dropped 12.1% to $27.8 million. The absence of
political advertising in an off-election year was a major factor in the
Broadcasting Group's shortfall in 2003.
"BusinessWeek gained share in 2003 even though advertising pages in the
North American edition declined 6.5% for the fourth quarter and 9.0% for the
year, according to the Publishers Information Bureau. BusinessWeek produced
increases in revenue in the third and fourth quarters, the publication's first
back-to-back quarterly improvement in four years.
"For construction services, effective cost containment and the successful
launch of the McGraw-Hill Construction Network contributed to an improved
operating margin, even as revenue declined. The energy, aviation and
healthcare markets were all soft.
The outlook: "We're planning another year of growth in 2004. Even with
an anticipated decline in the elementary-high school marketplace, we project
income from continuing operations to increase in the mid-to-high single digits
in 2004, without the reoccurrence of the 30-cent after-tax benefit from the
sale of the equity interest in Rock-McGraw, Inc."
Conference Call Schedule: The Corporation's senior management will review
the fourth quarter 2003 earnings results on a conference call scheduled for
this morning, January 27th, at 8:30 AM 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 Management Commentary page of the Investor Relations section of the
Corporation's website at www.mcgraw-hill.com/investor_relations. To
participate by telephone, please dial-in by 8:15 AM Eastern Time and register
before the start of the call. Domestic participants may call toll-free
(888) 673-9805; international participants may call +1 (773) 756-4711 (long
distance charges will apply). The passcode is McGraw-Hill and the conference
leader is Harold McGraw III. The conference call will also be Webcast. Go to
the Corporation's Investor Relations website and click on the 4Q Earnings
button. At the next screen, select the Webcast link under Listening Options.
You will need Windows Media Player. The prepared remarks and slides will be
available for downloading from the Investor Relations website's Management
Commentary archive several hours after the end of the call. The Webcast replay
will be available until February 3, 2004.
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 and political conditions, the health
of capital and equity markets, including possible future interest rate
changes, the pace of recovery in the economy and in advertising, the level of
expenditures in the education market, the successful marketing of competitive
products and the effect of competitive products and pricing.
About The McGraw-Hill Companies:
Founded in 1888, The McGraw-Hill Companies is a leading global information
services provider meeting worldwide needs in the financial services, education
and business information markets through leading brands such as Standard &
Poor's, BusinessWeek and McGraw-Hill Education. The Corporation has more than
322 offices in 33 countries. Sales in 2003 were $4.8 billion. Additional
information is available at http://www.mcgraw-hill.com.
The McGraw-Hill Companies
Statements of Income
Periods ended December 31, 2003 and 2002
(in thousands, except per share data)
(unaudited) Three Months Twelve Months
% %
2003 2002 Change 2003 2002 Change
---------- ---------- ------ ---------- ---------- ------
Operating
revenue $1,222,357 $1,141,258 7.1 $4,827,857 $4,640,184 4.0
Expenses, net 841,498 922,412 -8.8 3,690,483 3,720,272 -0.8
---------- ---------- ---------- ----------
Income from
operations 380,859 218,846 74.0 1,137,374 919,912 23.6
Interest
expense/(income) (281) 2,979 N/M 7,097 22,517 -68.5
---------- ---------- ---------- ----------
Income from
continuing
operations before
taxes on income 381,140 215,867 76.6 1,130,277 897,395 26.0
Provision for
taxes on income 165,286 80,950 104.2 442,466 325,429 36.0
---------- ---------- ---------- ----------
Income from
continuing
operations $215,854 $134,917 60.0 $687,811 $571,966 20.3
---------- ---------- ---------- ----------
Discontinued
operations:
Earnings/(loss)
from operations
of discontinued
components $(78,809) $(77) N/M $6,432 $7,670 N/M
Income tax
expense/
(benefit) (22,879) (29) N/M 6,593 2,876 N/M
---------- ---------- ---------- ----------
Earnings/(loss)
from discontinued
operations $(55,930) $(48) N/M $(161) $4,794 N/M
Net income $159,924 $134,869 18.6 $687,650 $576,760 19.2
========== ========== ========== ==========
Earnings per
common share:
Basic earnings
per share:
Income from
continuing
operations $1.13 $0.70 61.4 $3.61 $2.97 21.5
========== ========== ========== ==========
Net income $0.84 $0.70 20.0 $3.61 $2.99 20.7
========== ========== ========== ==========
Diluted earnings
per share:
Income from
continuing
operations $1.12 $0.69 62.3 $3.58 $2.94 21.8
========== ========== ========== ==========
Net income $0.83 $0.69 20.3 $3.58 $2.96 20.9
========== ========== ========== ==========
Dividend per
common share $0.270 $0.255 5.9 $1.080 $1.020 5.9
========== ========== ========== ==========
Average number
of common shares
outstanding:
Basic 190,714 192,652 190,492 192,888
Diluted 192,740 194,100 192,005 194,573
N/M - not meaningful
The McGraw-Hill Companies
Operating Results by Segment
Periods ended December 31, 2003 and 2002
(dollars in thousands)
(unaudited) Revenue Operating Profit
% Favorable % Favorable
2003 2002 (Unfavorable) 2003 2002 (Unfavorable)
-------- ------- ----------- ------- ------- ----------
Three Months
McGraw-Hill
Education $495,483 $488,599 1.4 $39,986 $39,259 1.9
Financial
Services 494,308 407,557 21.3 179,431 147,326 21.8
Information
and Media
Services 232,566 245,102 (5.1) 53,611 59,743 (10.3)
--------- --------- ----- -------- ------- ------
Total operating
segments 1,222,357 1,141,258 7.1 273,028 246,328 10.8
General
corporate
expense (2) - - - 107,831 (27,482) N/M
Interest
income/(expense) - - - 281 (2,979) N/M
--------- --------- ----- -------- ------- ------
Total
company $1,222,357 $1,141,258 7.1 $381,140* $215,867* 76.6
========== ========== ===== ======== ======== ======
(dollars in thousands)
(unaudited) Revenue Operating Profit
% Favorable % Favorable
2003 2002 (Unfavorable) 2003 2002 (Unfavorable)
-------- -------- ----------- ------- ------ ----------
Twelve Months
McGraw-Hill
Education $2,286,161 $2,275,019 0.5 $321,751 $332,949 (3.4)
Financial
Services(1) 1,769,093 1,555,726 13.7 667,597 560,845 19.0
Information
and Media
Services 772,603 809,439 (4.6) 109,841 118,052 (7.0)
---------- ---------- ----- -------- -------- -----
Total operating
segments 4,827,857 4,640,184 4.0 1,099,189 1,011,846 8.6
General
corporate
expense (2) - - - 38,185 (91,934) N/M
Interest
income/
(expense) - - - (7,097) (22,517) 68.5
---------- ---------- ----- -------- -------- -----
Total
company $4,827,857 $4,640,184 4.0 $1,130,277* $897,395* 26.0
========== ========== ===== ========== ======== =====
*Income from continuing operations before taxes on income
(1) The 2002 year-to-date results include a $14.5 million pre-tax loss
($2.0 million after-tax benefit, or 1 cent per diluted share) on the
disposition of MMS International.
(2) The 2003 quarter and year-to-date results include a pre-tax gain on
sale of real estate of $131.3 million ($58.4 million after-tax gain,
or 30 cents per diluted share).
N/M - not meaningful
The McGraw-Hill Companies
Reconciliation of Net Income and Diluted Earnings Per Common Share
Periods ended December 31, 2003 and 2002
(in thousands, except per share data)
(unaudited)
Three Months
2003 2002 EPS Growth
EPS EPS $ %
Net income $159,924 $0.83 $134,869 $0.69 $0.14 20.3
======== ===== ======== ===== ===== ====
(Loss)/Earnings
on discontinued
operations (55,930) (0.29) (48) (0.00) N/M N/M
Juvenile Retail
Publishing
Business(1)
Pre-tax (loss)
on planned
disposition of
juvenile retail
publishing
business (75,919) (0.39) - -
Income tax benefit
from loss on
planned
disposition of
juvenile retail
publishing
business 21,810 0.11 - -
After-tax (loss)
on discontinued
operations of
juvenile retail
publishing
business (1,821) (0.01) (2,225) (0.01)
-------- ----- -------- ----- ----- ----
Net after-tax
(loss) on
discontinued
operations of
juvenile retail
publishing
business (55,930) (0.29) (2,225) (0.01) N/M N/M
S&P ComStock:
Pre-tax gain on
disposition of
S&P ComStock - - 3,483 0.02
Income tax (expense)
from gain on
disposition of
S&P ComStock - - (1,306) (0.01)
-------- ----- -------- ----- ----- ----
Net after-tax
earnings on
discontinued
operations of
S&P ComStock - - 2,177 0.01 N/M N/M
Income from
continuing
operations $215,854 $1.12 $134,917 $0.69 $0.43 62.3
======== ===== ======== ===== ===== ====
Weighted Average
Shares - Diluted 192,740 194,100
Included in income
from continuing
operations (above):
Disposition of
MMS International
(MMSI)
(Loss) on
disposition $ - $ - $ - $ -
Income tax benefit
on disposition - - - -
-------- ----- -------- ----- ----- ----
Net after-tax
benefit on
disposition of MMSI $ - $ - $ - $ - N/M N/M
Disposition of
equity interest
in Rock-McGraw,
Inc. (RMI)
Gain on
disposition $131,251 $0.68 $ - $ -
Income tax
(expense) on
disposition (72,827) (0.38) - -
-------- ----- -------- ----- ----- ----
Net after-tax gain
on disposition
of RMI $58,424 $0.30 $ - $ - N/M N/M
Other financial
information:
First Call
Mean Estimate $0.75
Operating loss on
disposition of
juvenile retail
publishing business 0.01
-----
$0.76
N/M - not meaningful
(1) Landoll, Frank Schaffer and related juvenile retail publishing
businesses
Note: Earnings per share data may reflect rounding differences
The McGraw-Hill Companies
Reconciliation of Net Income and Diluted Earnings Per Common Share
Periods ended December 31, 2003 and 2002
(in thousands, except per share data)
(unaudited)
Twelve Months
2003 2002 EPS Growth
EPS EPS $ %
Net income $687,650 $3.58 $576,760 $2.96 $0.62 20.9
======== ===== ======== ===== ===== ====
(Loss)/Earnings
on discontinued
operations (161) (0.00) 4,794 0.02 N/M N/M
Juvenile Retail
Publishing Business(1)
Pre-tax (loss) on
planned disposition
of juvenile retail
publishing
business (75,919) (0.39) - -
Income tax benefit
from loss on
planned disposition
of juvenile retail
publishing
business 21,810 0.11 - -
After-tax (loss)
on discontinued
operations of
juvenile retail
publishing
business (3,238) (0.02) (723) (0.00)
-------- ----- -------- ----- ----- ----
Net after-tax (loss)
on discontinued
operations of
juvenile retail
publishing
business (57,347) (0.30) (723) (0.00) N/M N/M
S&P ComStock:
Pre-tax gain on
disposition of
S&P ComStock 87,490 0.46 8,827 0.04
Income tax (expense)
from gain on
disposition of
S&P ComStock (30,304) (0.16) (3,310) (0.02)
-------- ----- -------- ----- ----- ----
Net after-tax
earnings on
discontinued
operations of
S&P ComStock 57,186 0.30 5,517 0.02 N/M N/M
Income from
continuing
operations $687,811 $3.58 $571,966 $2.94 $0.64 21.8
======== ===== ======== ===== ===== ====
Weighted Average
Shares - Diluted 192,005 194,573
Included in income
from continuing
operations (above):
Disposition of MMS
International (MMSI)
(Loss) on
disposition $ - $ - $(14,534) $(0.08)
Income tax benefit
on disposition - - 16,545 0.09
-------- ----- -------- ----- ----- ----
Net after-tax
benefit on
disposition
of MMSI $ - $ - $2,011 $0.01 N/M N/M
Disposition of
equity interest
in Rock-McGraw,
Inc. (RMI)
Gain on
disposition $131,251 $0.68 $- $-
Income tax
(expense) on
disposition (72,827) (0.38) - -
-------- ----- -------- ----- ----- ----
Net after-tax
gain on
disposition
of RMI $58,424 $0.30 $ - $ - N/M N/M
Other financial
information:
First Call
Mean Estimate $3.20
Operating loss on
disposition of
juvenile retail
publishing
business 0.02
-----
$3.22
N/M - not meaningful
(1) Landoll, Frank Schaffer and related juvenile retail publishing
businesses
Note: Earnings per share data may reflect rounding differences
SOURCE The McGraw-Hill Companies
-0- 01/27/2004
/CONTACT: Media Relations:
Steven H. Weiss
Vice President, Corporate Communications
The McGraw-Hill Companies
(212) 512-2247 (office)
(917) 374-2024 (mobile)
(212) 580-2565 (home)
weissh@mcgraw-hill.com
Tom DiPiazza
Director, Corporate Communications
The McGraw-Hill Companies
(212) 512-4145 (office)
(917) 328-7582 (mobile)
tom_dipiazza@mcgraw-hill.com
Investor Relations Contact:
Donald S. Rubin
Senior Vice President, Investor Relations
The McGraw-Hill Companies
(212) 512-4321 (office)
(212) 512-3840 (fax)
donald_rubin@mcgraw-hill.com /
/Web site: http://www.mcgraw-hill.com /
(MHP)
CO: McGraw-Hill Companies
ST: New York
IN: PUB FIN ENT
SU: ERN CCA