Exhibit 99
The McGraw-Hill Companies Reports
First Quarter Earnings Per Share of 39 Cents
Revenue Grows by 9.7%
Operating Margin Improves in All 3 Segments
NEW YORK, April 27 /PRNewswire-FirstCall/ -- The McGraw-Hill Companies
(NYSE: MHP) today reported diluted earnings per share of 39 cents from net
income for the first quarter of 2004. The results include a one-time non-cash
benefit of $20 million, or 10 cents per share, of accrued tax liabilities
following the completion of various federal, state, local and foreign tax
audits. This compares to the first quarter 2003 diluted earnings per share
from net income of 50 cents, which included an after-tax impact of 29 cents
from discontinued operations last year.
Income from continuing operations for the first quarter of 2004 increased
91.3% to $76.3 million. Net income for the first quarter of 2004 was $75.7
million.
Revenue for the first quarter of 2004 increased 9.7% to $911.6 million.
"We gained momentum late in the first quarter and finished with a very
solid performance," said Harold McGraw III, chairman, president and chief
executive officer of The McGraw-Hill Companies. "Buoyed by a surge of
financing in March, Financial Services produced a record first quarter. We
also saw pickups in education and advertising and benefited from rigorous cost
controls.
Education: "Revenue for the segment increased 6.4% to $278.2 million and
the operating loss was reduced by 2.0% to $68.8 million in the first quarter
compared to the same period last year. Favorable foreign exchange rates
contributed $6.1 million to revenue and had a slightly negative impact on
operating profits.
"Revenue for the McGraw-Hill School Education Group grew by 8.6% to $125.1
million in the first quarter. Revenue for the McGraw-Hill Higher Education,
Professional and International Group increased by 4.7% to $153.1 million.
"Growth in reading and testing markets was key to the McGraw-Hill School
Education Group's improved performance in a seasonally slow quarter for
education. The federal No Child Left Behind Act signed into law in 2002
placed new emphasis on teaching reading in the early years. As a result,
educators are now acquiring reading preparation materials for the pre-K
market, new programs for grades K-3 and remedial products for grades 4-6.
Some of the funding for our material came from Reading First and Early Reading
First programs, which are part of the No Child Left Behind Act.
"We continue to benefit from the increased emphasis on testing as states
prepare to meet mandatory federal requirements to test annually every child in
grades 3 through 8 in reading and math beginning in the 2005-06 school year.
Custom-contract revenue improved in California, Wisconsin, Connecticut, West
Virginia, Colorado and Maryland, but expenses increased because of additional
scoring requirements for some state contracts. We also won a new statewide
contract for Arizona.
"Sales in higher education markets here and abroad offset softness in
professional titles in the first quarter. School products also contributed to
improved international sales in Latin America, the United Kingdom and Canada.
"In the U.S. college and university market, key titles in the first
quarter were:
* Bodi, Investments, 6/e
* Nickels, Understanding Business, 7/e
* Block, Foundations of Financial Management, 11/e
"Imprints in science, engineering and mathematics also contributed to the
first quarter gain.
Financial Services: "Revenue for this segment increased 15.6% to $456.6
million and operating profits grew by 19.9% to $173.8 million in the first
quarter versus last year. Favorable foreign exchange rates contributed $9.7
million to revenue and had a slightly negative impact on operating profit in
the first quarter.
"Strong structured finance and high-yield corporate markets here and
abroad as well as solid growth in counterparty credit ratings and rating
evaluation services all contributed to Standard & Poor's outstanding results.
International ratings accounted for nearly 35% of ratings revenue and grew
faster than domestic operations.
"Corporate and structured financing activity surged late in the first
quarter. Typically, there is a pickup in structured finance during the final
month of each quarter, but action this year was particularly heavy late in
March in the residential mortgage-backed securities market. There also was
good growth in other asset classes, including commercial mortgage-backed
securities and collateralized debt obligations.
"New issue dollar volume grew in the United States and in European bond
markets in the first quarter versus the same period in 2003. In the U.S., new
issue dollar volume was up 10.4%. Corporate new issuance increased 9.1%.
Public finance declined by 5.5%. Mortgage-backed issuance was up 29.6%, while
asset-backed issuance declined 12.2%, according to reports from Securities
Data Corporation and Harrison Scott Publications.
"In Europe, new issue dollar volume soared by 42.1%, according to
Securities Data Corporation and Harrison Scott Publications.
"Demand for retail and brokerage information is recovering slowly, but
sales of products and services to institutional clients picked up as
conditions in financial markets continued to improve. Assets under management
for Exchange-Traded Funds based on S&P indexes climbed to $81.3 billion at the
end of March, a 34.6% increase over the first quarter of 2003.
"Valuation services improved, reflecting growing merger and acquisition
activity and continued growth in non-valuation services in real estate and
litigation support.
Information and Media Services: "Revenue for this segment increased 1.3%
to $176.7 million and operating profits, reflecting effective cost containment
efforts, grew by 9.4% to $13.7 million in the first quarter versus the same
period last year.
At the Business-to-Business Group, which includes BusinessWeek,
construction, energy, aviation and healthcare products and services, revenue
was up 0.6% to $152.0 million for the first quarter.
"After a slow start, advertising pages in BusinessWeek increased 11.8% in
March enabling the publication to finish the first quarter with a year-over-
year gain of 2.6%, according to the Publishers Information Bureau.
"Conferences and shows contributed to improvement in aviation and energy,
where information products also benefited from increased volatility in the oil
and gas markets. The McGraw-Hill Construction Network, launched late in 2003,
continues to gain momentum but could not offset softness in advertising in the
publications serving the construction market.
"For the Broadcasting Group, revenue increased 5.8% to $24.7 million in
the first quarter as strong political advertising helped offset the absence of
the Super Bowl, which had been aired on ABC in 2003.
The outlook: "We're pleased with the good start in 2004 from our three
segments, even though the first quarter is by far our smallest each year. On
a full year basis, we still face the lightest adoption calendar of the decade
in the elementary-high school market, somewhat tougher comparisons in
Financial Services and an anticipated decline in the issuance of residential
mortgage-backed securities.
"Despite these market issues, our full year guidance remains unchanged.
We continue to 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 first quarter 2004 earnings results on a conference call scheduled for
this morning, April 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 1Q 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 May 4, 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, political and regulatory 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 March 31, 2004 and 2003
(in thousands, except per share data)
(unaudited) Three Months
-----------------------------
2004 2003 % Change
------ ------ --------
Operating revenue $ 911,575 $ 830,814 9.7
Expenses, net 820,527 764,862 7.3
------- -------
Income from operations 91,048 65,952 38.1
Interest expense 1,737 2,679 -35.2
------- -------
Income from continuing operations
before taxes on income 89,311 63,273 41.2
Provision for taxes on income 13,045 23,410 -44.3
------- -------
Income from continuing operations $ 76,266 $ 39,863 91.3
------- -------
Discontinued operations:
(Loss)/earnings from operations
of discontinued components $ (931) $ 84,865 N/M
Income tax (benefit)/expense (344) 29,333 N/M
------- -------
(Loss)/earnings from discontinued
operations $ (587) $ 55,532 N/M
Net income $ 75,679 $ 95,395 -20.7
========= =========
Earnings per common share:
Basic earnings per share:
Income from continuing operations $ 0.40 $ 0.21 90.5
========= =========
Net income $ 0.40 $ 0.50 -20.0
========= =========
Diluted earnings per share:
Income from continuing operations $ 0.39 $ 0.21 85.7
========= =========
Net income $ 0.39 $ 0.50 -22.0
========= =========
Dividend per common share $ 0.30 $ 0.27 11.1
========= =========
Average number of common shares
outstanding:
Basic 190,581 190,933
Diluted 193,490 191,982
N/M - not meaningful
EXHIBIT 1
The McGraw-Hill Companies
Operating Results by Segment
Periods ended March 31, 2004 and 2003
(dollars in thousands)
(unaudited) Revenue
---------------------------------
%
Favorable
2004 2003 (Unfavorable)
------ ------ -----------
Three Months
McGraw-Hill Education (a) $278,197 $261,430 6.4
Financial Services 456,635 394,895 15.6
Information and Media Services 176,743 174,489 1.3
-------- -------- -------
Total operating segments 911,575 830,814 9.7
General corporate expense - - -
Interest expense - - -
-------- -------- -------
Total company $911,575 $830,814 9.7
======== ======== =======
(a) The three months ended March 31, 2003 have been restated to exclude
discontinued operations as a result of the disposition of the
Landoll, Frank Schaffer and related juvenile retail publishing
businesses.
The McGraw-Hill Companies
Operating Results by Segment
Periods ended March 31, 2004 and 2003
(unaudited) Operating Profit
%
Favorable
2004 2003 (Unfavorable)
------ ------- -------------
Three Months
McGraw-Hill Education (a) $(68,796) $(70,180) 2.0
Financial Services 173,839 144,991 19.9
Information and Media Services 13,651 12,476 9.4
------- ------- -------
Total operating segments 118,694 87,287 36.0
General corporate expense (27,646) (21,335) (29.6)
Interest expense (1,737) (2,679) 35.2
------- -------- -------
Total company $89,311 * $63,273 * 41.2
======= ======== =======
(a) The three months ended March 31, 2003 have been restated to exclude
discontinued operations as a result of the disposition of the
Landoll, Frank Schaffer and related juvenile retail publishing
businesses.
* Income from continuing operations before taxes on income
EXHIBIT 2
SOURCE The McGraw-Hill Companies
-0- 04/27/2004
/CONTACT: Media Relations Contacts:
Steven H. Weiss
Vice President, Corporate Communications
The McGraw-Hill Companies
+1-212-512-2247 (office)
+1-917-374-2024 (mobile)
+1-212-580-2565 (home)
weissh@mcgraw-hill.com
Tom DiPiazza
Director, Corporate Communications
The McGraw-Hill Companies
+1-212-512-4145 (office)
+1-917-328-7582 (mobile)
tom_dipiazza@mcgraw-hill.com
Investor Relations Contact:
Donald S. Rubin
Senior Vice President, Investor Relations
The McGraw-Hill Companies
+1-212-512-4321 (office)
+1-212-512-3840 (fax)
donald_rubin@mcgraw-hill.com /
/Web site: http://www.mcgraw-hill.com /
(MHP)
CO: McGraw-Hill Companies
ST: New York
IN: FIN PUB
SU: ERN CCA