Exhibit 99
THE MCGRAW-HILL COMPANIES REPORTS 18.6% INCREASE IN
SECOND QUARTER EPS TO $0.51
REVENUE GROWS BY 16.9%
NEW YORK, July 26 /PRNewswire-FirstCall/ -- The McGraw-Hill Companies (NYSE:
MHP) today announced diluted earnings per share from continuing operations of
$0.51 for the second quarter of 2005, an 18.6% increase over the $0.43 reported
for the same period last year. The second quarter 2005 results include $0.03
dilution from acquisitions in 2004 and 2005. All prior year earnings per share
have been adjusted to reflect the two-for-one stock split that was distributed
on May 17, 2005 to shareholders of record on May 6, 2005.
"Net income for the second quarter was $195 million versus $165.6 million
for the same period last year.
"Revenue for the second quarter grew by 16.9% to $1.5 billion.
"A record performance at Financial Services and a solid increase at
McGraw-Hill Education were key to our second quarter results," said Harold
McGraw III, chairman, president and chief executive officer of The McGraw-Hill
Companies.
"For the first half of 2005, earnings per share from continuing operations
were $0.71 versus $0.63 for the same period last year.
"The first-half results of 2005 reflect $0.04 of dilution from acquisitions
in 2004 and 2005. The 2004 results include a non-cash benefit of $0.05 per share
of accrued tax liabilities following the completion of various federal, state,
local and foreign tax audits.
Education: "Revenue for this segment in the second quarter grew by 14.8% to
$628.6 million while operating profit improved by 25.5% to $71.6 million.
Foreign exchange rates contributed $3.4 million to revenue and had a slightly
positive impact on operating profit.
"Revenue for the McGraw-Hill School Education Group increased 17.0% in the
second quarter to $414.4 million. Revenue for McGraw-Hill Higher Education,
Professional and International Group grew by 10.9% to $214.2 million.
"A very good year is taking shape for the McGraw-Hill School Education Group
even if Texas does not provide all the funding we had anticipated in 2005. The
Texas legislature recently approved $295 million for instructional materials the
state adopted for purchasing this year, but funding is contingent on decisions
lawmakers now meeting in a special session will make on taxes and other school
financing issues.
"In the second quarter, the breadth and depth of McGraw-Hill School
Education's product lineup helped us grow in the state adoption market, the open
territories and in testing.
"The biggest new state adoption opportunity this year was in social studies.
With most district-level decision-making completed by the end of the second
quarter, our middle and high school programs led the secondary market with
powerful performances in Florida and Alabama. Our elementary health program
captured leading shares in California, Indiana, and South Carolina, while both
our elementary and secondary science programs achieved excellent results in
North Carolina and Indiana.
"In Texas, we started to benefit from funding that was released in the
second quarter for the purchase of business, family and consumer science and
technology products. Sales of these vocational and technology programs had been
scheduled in 2004, but were postponed because of funding issues. Residual sales
in reading and math also contributed to our strong second quarter performance in
Texas.
"Our alternative basals, Open Court Reading and Everyday Mathematics, have
continued to capture new sales across the country. Our elementary school
products realized incremental revenue from Reading First, the program created as
part of the No Child Left Behind Act to ensure children can read at or above
grade level by the end of third grade. To reinforce that effort, the Los Angeles
Unified School District is purchasing Kaleidoscope, our new intervention product
for the elementary grades.
"To meet No Child Left Behind requirements for testing in reading and math
in grades three through eight at the end of the 2005-06 academic year, states
have been developing standards-based assessment programs. State compliance
activity has created solid growth in our custom contracts business, which is
offsetting declining sales for national, norm-referenced assessments. We also
benefited from the expansion of business with the State of Qatar's National
Assessment Program.
"Our higher education products sold well here and abroad. In the U.S.
college and university market, we are particularly encouraged by the second
quarter performance in Science, Engineering and Math, which introduced new
editions of some of its best sellers in chemistry, biology and mathematics. With
our other major imprints in Humanities, Social Science and Language, and
Business and Economics also producing increases in the second quarter, we
continue to expect to gain share in the U.S. college and university market this
year.
"In professional markets, our medical titles generated solid results. New
16th editions of Harrison's Manual of Medicine, published in February, and
Harrison's Principles of Internal Medicine, published last July, were primary
drivers. A Spanish-language edition of Harrison's Principles of Internal
Medicine sold well in Mexico.
"Four of our leading trade titles were recognized as best sellers in the
second quarter. Crucial Conversations, The Millionaire Real Estate Investor and
The Millionaire Real Estate Agent all made it onto BusinessWeek's list of best
sellers. Wooden on Leadership was on The Wall Street Journal's list.
Financial Services: "Revenue for this segment in the second quarter
increased 18.4% to $597.4 million and operating profit grew by 20.6% to $258.3
million compared to the same period in 2004. Foreign exchange rates contributed
$4.4 million to revenue and $5.3 million to operating profit in the second
quarter of 2005.
"Standard & Poor's growing geographic and product diversity in debt and
equity markets around the world produced another record quarter. Setting the
pace were international credit ratings and services, which grew faster than
domestic products and accounted for 35% of ratings revenue. International
ratings accounted for 33% of ratings revenue in the second quarter last year.
"Issuer and investor appetite for securitized debt again played a key role
in our results. Structured finance showed strength across all asset classes and
in all of our international regions - Europe, Asia, Latin America and Canada. In
Europe, our largest overseas market, Mortgage-Backed Securities and
Collateralized Debt Obligations, were particularly strong as investors sought a
combination of attractive yields, good credit quality and asset protection.
"In the United States, the Residential Mortgage-Backed Securities market
continued to confound predictions of a slowdown. A strong housing market, lower
than expected interest rates and a proliferation of new mortgage products,
including hybrid adjustable rate mortgages, negative amortization loans and
interest-only mortgages, helped produce a 39.9% increase in new issue dollar
volume in the second quarter.
"The Commercial Mortgage-Backed Securities market set a new U.S. record for
issuance in the second quarter as dollar volume soared by 75.8%.
"The Collateralized Debt Obligations in the U.S. market grew by 64.1% in
the second quarter versus the same period last year.
"A steep decline in high-yield issuance and a slowdown in investment-grade
activity curtailed growth in corporates in the second quarter. Public finance
benefited from a surge in refunding activity.
"New issue dollar volume grew in the United States and European bond markets
in the second quarter versus the same period in 2004. In the U.S., total new
issue dollar volume was up 23.0%. Corporate new issuance declined by 2.0%.
Public finance grew by 3.0%. Mortgage-Backed issuance climbed by 44.2% while
Asset-Backed issuance increased 29.1% according to reports from Securities Data
Corporation and Harrison Scott Publications.
"In Europe, new issue dollar volume was up 47.8%, according to Securities
Data Corporation and Harrison Scott Publications.
"We continue to benefit from ratings and services that are not tied to new
issuance. They represent just over 19% of ratings revenue in the second quarter
as financial strength ratings of insurance companies, counterparty credit
ratings and performance evaluation services helped offset a decline in bank loan
ratings and rating evaluation services.
"In equity markets, our sales of independent research continue to grow to
participants in the Global Research Settlement and to non-settlement firms here
and abroad.
"With assets under management in Exchange-Traded Funds (ETFs) based on S&P
indexes growing by 31.2% over the prior year, our indexes produced a solid gain.
At the end of June 2005, there was $118.2 billion in assets under management in
those ETFs.
"Volume also grew in contracts for exchange-traded derivatives based on S&P
indexes at the Chicago Board Option Exchange, the Chicago Mercantile Exchange
and other options exchanges. Daily average volume in the second quarter for
options based on Standard & Poor's Depositary Receipts (SPDRs) was 164,750. At
the Chicago Board Option Exchange, daily average volume for the S&P 500 options
contract was 260,139 in the second quarter.
Information and Media Services: "Revenue for this segment in the second
quarter grew by 18.6% to $230.3 million compared to the same period last year.
J.D. Power and Associates, which was acquired on April 1, 2005, accounted for
$33.6 million of the revenue increase in the second quarter. Operating profit in
the second quarter fell $11.2 million to $13.6 million due to a decline in
advertising and $8.9 million of acquisition-related costs at J.D. Power and
Associates.
"Foreign exchange rates had an immaterial effect on revenue, but reduced
operating profit by $0.2 million in the second quarter.
"Revenue for the Broadcasting Group in the second quarter was off 0.4% to
$27.9 million as growth in local-time sales virtually offset a decline in
national and political advertising.
"Revenue for the Business-to-Business Group, which includes BusinessWeek,
J.D. Power and Associates, construction, energy, aviation, and healthcare
products and services, increased 21.8% to $202.4 million in the second quarter.
The revenue increase reflects the acquisition of J.D. Power and Associates and
gains in information products and services, which offset a fall-off in
advertising revenue.
"Advertising pages for BusinessWeek's North American edition were off 9.2%
in the second quarter, according to the Publishers Information Bureau.
"We're pleased with J.D. Power and Associates' progress in the second
quarter. Auto and non-auto businesses produced substantial increases in revenue.
The integration is proceeding smoothly.
"Increases in advertising revenue at Architectural Record, ENR, the regional
publications and from our newly-launched magazines, My House and Constructor,
helped offset softness elsewhere in construction. In the second quarter of 2005,
we continued to make investments in the McGraw-Hill Construction Network to
strengthen its effectiveness and efficiency.
"In a volatile oil market, the demand for our news and pricing information
continued to grow.
"Aviation Week benefited from the Paris Air Show, which was held in the
second quarter.
The Outlook: "Given the strength of our first-half performance and the
outlook for the second half, we are increasing our earnings guidance for the
year. We now expect double-digit growth in earnings per share from continuing
operations, including $0.08 to $0.09 dilution from acquisitions in 2004 and 2005
and changes in pension plan assumptions for 2005, but excluding the 2004
non-cash benefit of $0.05 per share from accrued tax liabilities."
Conference Call/Webcast Details: The Corporation's senior management will
review the second quarter 2005 earnings results on a conference call scheduled
for this morning, July 26th, 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 Corporation's Investor Presentations website at
www.mcgraw-hill.com/investor_relations. To participate by telephone, please
dial-in by 8:20 AM Eastern Time and register before the start of the call.
Domestic participants may call toll-free (800) 857-9633; international
participants may call +1 (630) 395-0023 (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 Earnings Announcement link under Investor Presentation
Webcasts. At the Event Details screen, select the Webcast link. You will need
Windows Media Player. The prepared remarks and slides will be available for
downloading from the Investor Relations website's Investor Presentations archive
several hours after the end of the call and a Webcast replay will be available
until August 2, 2005.
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 global information services
provider meeting worldwide needs in the financial services, education and
business information markets through leading brands such as Standard & Poor's,
McGraw-Hill Education and BusinessWeek. The Corporation has more than 300
offices in 40 countries. Sales in 2004 were $5.3 billion. Additional information
is available at http://www.mcgraw-hill.com.
The McGraw-Hill Companies
Statements of Income
Periods ended June 30, 2005 and 2004
(in thousands, except per share data)
Three Months
------------------------------------------
(unaudited) 2005 2004 % Change
- -------------------------------------------- ------------ ------------ ------------
Revenue $ 1,456,277 $ 1,245,962 16.9
Expenses, net 1,142,304 980,902 16.5
------------ ------------
Income from operations 313,973 265,060 18.5
Interest expense 3,512 2,161 62.5
------------ ------------
Income from continuing operations before
taxes on income 310,461 262,899 18.1
Provision for taxes on income 115,491 97,273 18.7
------------ ------------
Income from continuing operations 194,970 165,626 17.7
------------ ------------
Discontinued operations:
Loss from operations of discontinued
component - - N/M
Income tax benefit - - N/M
------------ ------------
Loss from discontinued operations - - N/M
------------ ------------
Net income $ 194,970 $ 165,626 17.7
============ ============
Earnings per common share:
Basic earnings per share:
-------------------------
Income from continuing operations $ 0.52 $ 0.44 18.2
============ ============
Net income $ 0.52 $ 0.44 18.2
============ ============
Diluted earnings per share:
---------------------------
Income from continuing operations $ 0.51 $ 0.43 18.6
============ ============
Net income $ 0.51 $ 0.43 18.6
============ ============
Dividend per common share $ 0.165 $ 0.150 10.0
Average number of common shares outstanding:
Basic 373,534 379,180
Diluted 380,047 385,214
N/M - not meaningful
The McGraw-Hill Companies
Statements of Income
Periods ended June 30, 2005 and 2004
(in thousands, except per share data)
Six Months
------------------------------------------
(unaudited) 2005 2004 % Change
- -------------------------------------------- ------------ ------------ ------------
Revenue $ 2,485,283 $ 2,165,829 14.7
Expenses, net 2,045,636 1,809,721 13.0
------------ ------------
Income from
operations 439,647 356,108 23.5
Interest expense 4,210 3,898 8.0
------------ ------------
Income from continuing operations before
taxes on income 435,437 352,210 23.6
Provision for taxes on income 161,732 110,318 46.6
------------ ------------
Income from continuing operations 273,705 241,892 13.2
------------ ------------
Discontinued operations:
Loss from operations of discontinued
component - (931) N/M
Income tax benefit - (344) N/M
------------ ------------
Loss from discontinued operations - (587) N/M
------------ ------------
Net income $ 273,705 $ 241,305 13.4
============ ============
Earnings per common share:
Basic earnings per share:
-------------------------
Income from continuing operations $ 0.73 $ 0.64 14.1
============ ============
Net income $ 0.73 $ 0.63 15.9
============ ============
Diluted earnings per share:
---------------------------
Income from continuing operations $ 0.71 $ 0.63 12.7
============ ============
Net income $ 0.71 $ 0.63 12.7
============ ============
Dividend per common share $ 0.330 $ 0.300 10.0
============ ============
Average number of common shares outstanding:
Basic 376,191 380,226
Diluted 383,332 386,152
N/M - not meaningful
EXHIBIT 1
The McGraw-Hill Companies
Operating Results by Segment
Periods ended June 30, 2005 and 2004
Revenue
-------------------------------------------
% Favorable
(unaudited) 2005 2004 (Unfavorable)
- -------------------------------------------- ------------ ------------ -------------
(dollars in thousands)
Three Months
McGraw-Hill Education $ 628,647 $ 547,386 14.8
Financial Services 597,366 504,472 18.4
Information and Media Services 230,264 194,104 18.6
------------ ------------
Total revenue $ 1,456,277 $ 1,245,962 16.9
============ ============
Revenue
-------------------------------------------
% Favorable
(unaudited) 2005 2004 (Unfavorable)
- -------------------------------------------- ------------ ------------ -------------
(dollars in thousands)
Six Months
McGraw-Hill Education $ 935,947 $ 833,875 12.2
Financial Services 1,144,647 961,107 19.1
Information and Media Services 404,689 370,847 9.1
------------ ------------
Total revenue $ 2,485,283 $ 2,165,829 14.7
============ ============
The McGraw-Hill Companies
Operating Results by Segment
Periods ended June 30, 2005 and 2004
Operating Profit
-------------------------------------------
% Favorable
(unaudited) 2005 2004 (Unfavorable)
- -------------------------------------------- ------------ ------------ -------------
(dollars in thousands)
Three Months
McGraw-Hill Education $ 71,591 $ 57,055 25.5
Financial Services 258,286 214,205 20.6
Information and Media Services 13,608 24,841 (45.2)
------------ ------------
Total operating segments 343,485 296,101 16.0
General corporate expense (29,512) (31,041) 4.9
Interest expense (3,512) (2,161) (62.5)
------------ ------------
Total operating profit $ 310,461* $ 262,899* 18.1
============ ============
Operating Profit
-------------------------------------------
% Favorable
(unaudited) 2005 2004 (Unfavorable)
- -------------------------------------------- ------------ ------------ -------------
(dollars in thousands)
Six Months
McGraw-Hill Education $ (7,083) $ (11,741) 39.7
Financial Services 480,798 388,044 23.9
Information and Media Services 18,354 38,492 (52.3)
------------ ------------
Total operating segments 492,069 414,795 18.6
General corporate expense (52,422) (58,687) 10.7
Interest expense (4,210) (3,898) (8.0)
------------ ------------
Total operating profit $ 435,437* $ 352,210* 23.6
============ ============
* Income from continuing operations before taxes on income
EXHIBIT 2
SOURCE The McGraw-Hill Companies
-0- 07/26/2005
/CONTACT: Media Relations Contacts:
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
Senior Director, Corporate Communications
(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 /