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The McGrawHill Companies Inc. Reports Operating Results (10-Q)

July 26, 2012 | About:
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10qk

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The McGrawHill Companies Inc. (MHP) filed Quarterly Report for the period ended 2012-06-30.

The Mcgraw-hill Companies, Inc. has a market cap of $13.14 billion; its shares were traded at around $47.04 with a P/E ratio of 15.5 and P/S ratio of 2.1. The dividend yield of The Mcgraw-hill Companies, Inc. stocks is 2.2%. The Mcgraw-hill Companies, Inc. had an annual average earning growth of 7.9% over the past 10 years. GuruFocus rated The Mcgraw-hill Companies, Inc. the business predictability rank of 2.5-star.

Highlight of Business Operations:

S&P Ratings revenue for the second quarter increased 1%, while operating income decreased (2)%. For the first six months revenue increased 3%, while operating income decreased (2)%. Revenue growth was driven by increases in public finance driven by strong municipal bond issuance in the U.S., partially offset by declines in CRISIL, our majority owned Indian credit rating agency, and weaker bank loan ratings. The increase for the first six months was also impacted by record high-yield corporate bond issuance in the first quarter of 2012, partially offset by structured finance. Operating income decreased slightly compared to the second quarter and first six months of 2011 due to increased expenses resulting from higher personnel costs driven by global staff increases and increased legal expenses.

Operating-related expenses decreased $19 million or (3)%, primarily driven by lower costs at MHE compared to the second quarter of 2011, primarily due to a reduction in plant amortization, lower manufacturing costs and lower direct expenses associated with the decrease in the adoption states sales at MHE, collectively totaling $16 million in savings. Partially offsetting the decrease were increased compensation costs at S&P Capital IQ / S&P Indices of $9 million or 14% as a result of global staff increases and higher personnel costs. Incentive costs have also increased primarily due to higher expected performance achievement and an increase in the grant price of our equity awards.

or 6% at S&P Capital IQ / S&P Indices as revenue growth improved 9% and 10% , respectively. In addition, S&P Ratings had increased legal costs of $7 million as compared to the second quarter of 2011.

Operating-related expenses increased $8 million or 1%, primarily driven by increased compensation costs at S&P Ratings of $21 million or 8% and S&P Capital IQ / S&P Indices of $17 million or 14%. These increases were primarily a result of global staff increases and higher personnel costs. Incentive costs have also increased primarily due to higher expected performance achievement and an increase in the grant price of our equity awards. Partially offsetting the increases were lower costs at MHE compared to the first half of 2011 due to a reduction in plant amortization, lower manufacturing costs and lower direct expenses associated with the decrease in the adoption states sales at MHE, collectively totaling $23 million in savings.

During the first half of 2012, we recorded $75 million of Growth and Value Plan related costs necessary to enable separation and reduce our cost structure, which includes professional fees, transaction costs for our S&P/Dow Jones Indices, LLC joint venture, severance charges and a charge related to a reduction in our lease commitments. Excluding these costs, selling and general expenses decreased $48 million or (4)%, primarily due to lower personnel costs at MHE of $22 million as a result of the restructuring actions taken in the fourth quarter of 2011, and lower selling and marketing expenses of $36 million given the reduced revenue opportunities in the adoption states. In addition, the write-off of deferred costs recorded in prior periods at C&C during the second quarter of 2011 also impacted the reduction in selling and general expenses. These decreases were partially offset by higher costs associated with increased sales and additional stock-based compensation. Personnel costs increased $16 million or 13% at C&C and $10 million or 8% at S&P Capital IQ / S&P Indices as revenue growth improved 10% and 9%, respectively. In addition, S&P Ratings had increased legal costs of $19 million as compared to the first six months of 2011.

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