Exhibit 99
The McGraw-Hill Companies Reports 11.9% Increase in EPS from Continuing
Operations for Third Quarter of 2004
Increases Guidance to Double-Digit EPS Growth in 2004
NEW YORK, Oct. 21 /PRNewswire-FirstCall/ -- The McGraw-Hill Companies
(NYSE: MHP) today reported third quarter 2004 diluted earnings per share from
continuing operations of $1.69, an 11.9% increase over $1.51 for the same
period last year.
Income from continuing operations in the third quarter grew by 12.2% to
$324.5 million. Revenue for the third quarter increased 5.8% to $1.7 billion.
"Record results in Financial Services, improvement in higher education, a
pickup in advertising and careful cost controls all contributed to our third
quarter performance," said Harold McGraw III, chairman, president and chief
executive officer of The McGraw-Hill Companies. "As a result, we increased
our operating margin to 32.4% in the third quarter.
"For the first nine months of 2004, diluted earnings per share from
continuing operations grew to $2.94. The results include a first quarter 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. Income from continuing operations for the first nine months increased
to $566.4 million. Diluted earnings per share from net income of $2.94
compares with $2.75 in 2003, which included the favorable after-tax impact of
29 cents from discontinued operations.
"Revenue for the first nine months grew to $3.8 billion, an increase of
6.4% over the comparable period last year.
Education: "Revenue for this segment in the third quarter increased 2.0%
to more than $1.0 billion and operating profit grew by 9.1% to $323.3 million
compared to the same period last year. Favorable foreign exchange rates
contributed $4.2 million to revenue and had a favorable $1.4 million impact on
operating profit.
"Revenue in the third quarter for the McGraw-Hill Higher Education,
Professional and International Group (HPI) grew by 5.8% to $452.6 million.
Revenue for the McGraw-Hill School Education Group (SEG) slipped by 1.0% to
$552.7 million.
"The success of our titles in Business and Economics was a key to
capturing market share this year in the U.S. college and university market.
The 16th edition of McConnell's Economics, the world's best-selling economics
title, continues to win adherents. Two other market standards, the 7th
edition of Nickel's Understanding Business, an introductory text, and the 17th
edition of the Fundamentals of Accounting Principles by Larson also
contributed to our improved performance.
"We also benefited from increased sales in our lists for Science,
Engineering and Math and the Humanities, Social Sciences and Languages.
Best-sellers included the 8th edition of Chang's Chemistry, the 7th edition of
Ravens' Biology, the 7th edition of Knorre's Puntos de Partida and the 8th
edition of Lucas' The Art of Public Speaking.
"The successful introduction in the third quarter of the 16th edition of
Harrison's Principles of Internal Medicine in professional markets here and
abroad helped offset softness in Spanish-language publishing and a decline in
computer book sales.
"The McGraw-Hill School Education Group improved its market share this
year in a declining new state adoption market. At approximately $525 to $535
million, this year's new state adoption market, the smallest of the decade, is
down more than 30% from 2003. The biggest state adoption opportunity in 2004
was in math, where our strong list of secondary and reform-based basal
products enabled us to overcome a soft performance by our basal program in the
elementary market and emerge as the K-12 adoption market leader by capturing
36% of the available dollars.
"We also had success with math in the open territories. In the third
quarter, we recorded the largest single open territory order for mathematics
in our history when New York City purchased more than $20 million of our K-8
math products.
"The federal government's No Child Left Behind programs continue to
stimulate activity in reading and testing. Our revenue from the Reading First
program has increased in every quarter this year. We expect more Reading
First funds to reach the market in 2005.
"We are also winning new business in testing, but sales in a seasonally
slow third quarter could not offset the costs of increased scoring
requirements and investments in technology. The District of Columbia Public
Schools, with 65,000 students, last month announced that it will use the
second edition of our TerraNova test to provide assessments in reading,
language arts and mathematics for grades 3-11. The contract runs through
2008.
Financial Services: "Revenue for this segment in the third quarter
increased 14.1% to $502.8 million and operating profit grew by 17.7% to
$202.0 million compared to the same period last year. Favorable foreign
exchange rates contributed $6.1 million to revenue and had a negative impact
of $1.4 million on operating profit in the third quarter.
The results underscore the strength and resilience of our portfolio. Even
in the face of some softness in the U.S. corporate and public finance markets,
Standard & Poor's again produced a record quarter. International ratings grew
faster than domestic operations, accounting for approximately 35% of ratings
revenue, and equity services continued to improve.
"Structured finance set the pace globally with growth in virtually all
asset classes. The structured finance market also followed its usual pattern
with a rush of activity in the final month of the quarter.
"The residential mortgage-backed securities market continued to defy all
expectations of a slowdown by the third quarter. Instead, residential
mortgage-backed securities issuance grew in the U.S. and Europe as investors
showed an undiminished appetite for mortgage debt. There also was strong
demand for commercial mortgage-backed securities and collateralized debt
obligations.
"The asset-backed securities market also improved in the third quarter
after a slow start in 2004. Credit cards and auto and student loans continue
to account for most of the issuance.
"Products and services that are not tied to new issuance -- bank loan
ratings, rating evaluation services, counterparty credit ratings -- grew faster
than traditional ratings in the third quarter.
"New issue dollar volume increased by 17.9% in the United States bond
market and by 22.4% in Europe in the third quarter versus the same period in
2003. In the U.S. corporate market, new issuance was off 12.6%. Public
finance declined by 1.2%. Mortgage-backed securities issuance grew by 50.9%
and asset-backed securities issuance increased 19.2%, according to reports by
Securities Data Corporation and Harrison Scott Publications.
"Our index-based services produced another solid gain as assets under
management for Exchange Traded Funds based on S&P indexes grew by 38.6% in the
third quarter. At the end of September 2004, assets under management in
S&P-based Exchange Traded Funds hit $92.4 billion compared to $66.6 billion
for the same period last year. Trading of derivative contracts linked to S&P
indexes increased in volume at the Chicago Board of Options Exchange in the
third quarter.
"S&P's participation in the Global Research Settlement produced
incremental growth in the third quarter. S&P was selected by Goldman Sachs,
Credit Suisse First Boston, Morgan Stanley, Citibank Smith Barney and Piper
Jaffrey to provide independent equity research to their clients. S&P is also
participating in the Jaywalk platform and expanding its business with
non-settlement firms in the U.S. and overseas.
Information and Media Services: "Revenue for this segment in the third
quarter grew by 6.6% to $187.8 million and operating profit increased 23.3% to
$23.8 million compared to the same period last year.
"For the third quarter in a row, a pickup in advertising was key to the
segment's improved performance.
"Revenue for the Broadcasting Group increased by 9.0% to $27.0 million,
reflecting the growth of political advertising in an election year and
the continued strength of local-time sales in all our markets.
"Revenue for the Business-to-Business Group, which includes BusinessWeek,
construction, energy, aviation and healthcare products and services, increased
6.2% to $160.7 million.
"BusinessWeek's advertising pages were off 11.2% for the third quarter and
up 2.5% for the year, according to the Publishers Information Bureau. But
BusinessWeek also benefited from a special 75th anniversary edition that was
the publication's largest since December 2000.
"In construction, Architectural Record's ad pages increased as the
publication registered the second largest August issue in its 113-year
history. The McGraw-Hill Construction Network also showed improvement.
Investments increased in preparation for the launch of a new regional
residential publication.
"Our news and pricing services for gas and oil contributed to growth in
energy services. The biennial air show in the United Kingdom at Farnborough
in September contributed to an improvement in aviation.
The outlook: "With a solid performance in our seasonally most important
quarter of the year now in the record book, we are again raising our earnings
guidance for 2004.
"After a strong second quarter, we refined the forecast to call for high
single-digit growth in earnings per share from continuing operations in 2004
without the reoccurrence of the 30-cent after-tax benefit from the sale of the
equity interest in Rock-McGraw, Inc.
"We now expect double-digit growth in earnings per share from continuing
operations in 2004 without the reoccurrence of the 30-cent after-tax benefit
from the sale of the equity interest in Rock-McGraw, Inc.
"Growth in the fourth quarter will be influenced by a slower than
anticipated recovery in advertising, softness in the corporate and public
finance markets and tougher comparisons in the residential mortgage-backed
securities market. There also will be dilution of approximately two cents
from acquisitions.
"Still, we are confident in achieving our revised full-year earnings
guidance."
Conference Call Schedule: The Corporation's senior management will review
the third quarter 2004 earnings results on a conference call scheduled for
this morning, October 21st, 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 http://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 3Q 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 and a Webcast
replay will be available until October 28, 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
280 offices in 40 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 September 30, 2004 and 2003
(in thousands, except per share data)
(unaudited) Three Months Nine Months
2004 2003 % Change 2004 2003 % Change
---------- ---------- ------- ---------- --------- -------
Revenue $1,695,911 $1,602,667 5.8 $3,837,783 $3,605,500 6.4
Expenses, net 1,178,995 1,141,435 3.3 2,964,759 2,848,985 4.1
---------- ---------- ---------- ----------
Income from
operations 516,916 461,232 12.1 873,024 756,515 15.4
Interest expense 1,867 2,026 -7.8 5,765 7,378 -21.9
---------- ---------- ---------- ----------
Income from
continuing
operations
before taxes
on income 515,049 459,206 12.2 867,259 749,137 15.8
Provision
for taxes
on income 190,568 169,907 12.2 300,886 277,180 8.6
---------- ---------- ---------- ----------
Income from
continuing
operations $324,481 $289,299 12.2 $566,373 $471,957 20.0
---------- ---------- ---------- ----------
Discontinued
operations:
Earnings/(loss)
from operations
of discontinued
components $ - $1,582 N/M $(931) $85,241 N/M
Income tax
expense/
(benefit) - 585 N/M (344) 29,472 N/M
---------- ---------- ---------- ----------
Earnings/
(loss)from
discontinued
operations $ - $997 N/M $(587) $55,769 N/M
Net income $324,481 $290,296 11.8 $565,786 $527,726 7.2
========== ========== ========== ==========
Earnings per
common share:
Basic earnings
per share:
--------------
Income from
continuing
operations $1.71 $1.52 12.5 $2.98 $2.48 20.2
========== ========== ========== ==========
Net income $1.71 $1.52 12.5 $2.98 $2.77 7.6
========== ========== ========== ==========
Diluted
earnings per
share:
---------------
Income from
continuing
operations $1.69 $1.51 11.9 $2.94 $2.46 19.5
========== ========== ========== ==========
Net income $1.69 $1.51 11.9 $2.94 $2.75 6.9
========== ========== ========== ==========
Dividend per
common share $0.30 $0.27 11.1 $0.90 $0.81 11.1
========== ========== ========== ==========
Average number
of common
shares
outstanding:
Basic 189,380 190,524 189,894 190,447
Diluted 192,056 192,055 192,761 191,788
N/M - not meaningful
The McGraw-Hill Companies
Operating Results by Segment
Periods ended September 30, 2004 and 2003
(dollars in thousands)
(unaudited) Revenue Operating Profit
------------------------------ ----------------------------
% Favorable % Favorable
2004 2003 (Unfavorable) 2004 2003 (Unfavorable)
Three Months --------- ------- ----------- ------ ------ -------------
McGraw-Hill
Education(a)$1,005,353 $986,012 2.0 $323,255 $296,319 9.1
Financial
Services 502,799 440,525 14.1 202,022 171,618 17.7
Information and
Media Services 187,759 176,130 6.6 23,808 19,311 23.3
--------- --------- ---- -------- -------- ----
Total operating
segments 1,695,911 1,602,667 5.8 549,085 487,248 12.7
General
corporate
expense - - - (32,169) (26,016) (23.7)
Interest expense - - - (1,867) (2,026) 7.8
--------- --------- ---- -------- -------- ----
Total
company $1,695,911 $1,602,667 5.8 $515,049* $459,206* 12.2
========= ========= ==== ======== ======== ====
(dollars in thousands)
(unaudited) Revenue Operating Profit
------------------------------ ----------------------------
% Favorable % Favorable
2004 2003 (Unfavorable) 2004 2003 (Unfavorable)
Nine Months --------- ------- ------------ ------ ------- -------------
McGraw-Hill
Education(a) $1,815,271 $1,790,678 1.4 $311,514 $281,765 10.6
Financial
Services 1,463,906 1,274,785 14.8 590,066 488,166 20.9
Information
and Media
Services 558,606 540,037 3.4 62,300 56,230 10.8
--------- --------- ---- -------- -------- ----
Total
operating
segments 3,837,783 3,605,500 6.4 963,880 826,161 16.7
General
corporate
expense - - - (90,856) (69,646) (30.5)
Interest expense - - - (5,765) (7,378) 21.9
--------- --------- ---- -------- -------- ----
Total company $3,837,783 $3,605,500 6.4 $867,259* $749,137* 15.8
========= ========= ==== ======== ======== ====
*Income from continuing operations before taxes on income
(a) The three and nine months ended September 30, 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.
SOURCE McGraw-Hill Companies
-0- 10/21/2004
/CONTACT: Media Relations Contacts:
Steven H. Weiss
Vice President, Corporate Communications
The McGraw-Hill Companies
Office - +1-212-512-2247
Mobile - +1-917-374-2024
Home - +1-212-580-2565
weissh@mcgraw-hill.com
Mary Skafidas
Senior Manager, Corporate Communications
The McGraw-Hill Companies
Office - +1-212-512-2826
Mobile - +1-347-351-6407
Home - +1-516-365-1061
mary_skafidas@mcgraw-hill.com
Investor Relations Contact:
Donald S. Rubin
Senior Vice President, Investor Relations
The McGraw-Hill Companies
Office - +1-212-512-4321
Fax - +1-212-512-3840
donald_rubin@mcgraw-hill.com/
/Web site: http://www.mcgraw-hill.com/
(MHP)
CO: McGraw-Hill Companies
ST: New York
IN: CPR EDU FIN PUB
SU: ERN