The McGrawHill Companies Inc. (MHP, Financial) filed Quarterly Report for the period ended 2012-09-30.
Mcgraw-hill Companies, Inc. has a market cap of $15.7 billion; its shares were traded at around $55.24 with a P/E ratio of 17.5 and P/S ratio of 2.5. The dividend yield of Mcgraw-hill Companies, Inc. stocks is 1.8%. Mcgraw-hill Companies, Inc. had an annual average earning growth of 7.9% over the past 10 years. GuruFocus rated Mcgraw-hill Companies, Inc. the business predictability rank of 2.5-star.
Product revenue decreased $108 million or 11% as compared to the third quarter of 2011, primarily due to decreases at MHE from lower adoption state and open territory sales. Also contributing to the revenue reduction was a substantial increase in deferred revenue due to higher sales of programs that contain digital components that will be delivered over multiple years. Service revenue increased $153 million or 16% as compared to the third quarter of 2011, primarily due to increases in U.S. high-yield corporate bond issuance, growth in our global commodities products, increases in structured finance, growth for our Capital IQ product, growth in Global Data Solutions and recent acquisitions of R2 Technologies in February 2012, QuantHouse in April 2012 and CMA and the DJI business in June 2012. This was partially offset by declines in our construction business. See “Segment Review” below for further information.
During the quarter, we recorded $99 million of Growth and Value Plan related costs necessary to enable separation and reduce our cost structure, which primarily includes $50 million of restructuring charges and $40 million of professional fees. Excluding these costs, selling and general expenses increased $50 million or 9% as compared to the third quarter of 2011, primarily related to higher costs associated with increased sales and additional stock-based compensation mainly due to higher expected performance achievement and an increase in the grant price of our equity awards. Personnel costs, including incentive compensation, increased $25 million at S&P Ratings, $6 million at C&C and $3 million at S&P Capital IQ / S&P Indices as revenue growth improved 22%, 5% and 13%, respectively. These increases were partially offset by lower selling and marketing expenses of $9 million at MHE given the reduced revenue opportunities in the adoption states.
Operating-related expenses decreased $24 million or 1% as compared to the the first nine months of 2011, primarily driven by lower costs at MHE compared to the first nine months 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 $50 million in savings. This was partially offset by increased compensation costs at S&P Capital IQ / S&P Indices of $32 million or 16% and S&P Ratings of $13 million or 3%. These increases were primarily a result of global staff increases and higher personnel costs as noted above for the quarter.
During the first nine months of 2012, we recorded $174 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 increased $2 million as compared to the the first nine months of 2011, as higher costs associated with increased sales and additional stock-based compensation, mainly due to higher expected performance achievement and an increase in the grant price of our equity awards were offset by lower costs at MHE. Personnel costs increased $31 million at S&P Ratings, $21 million at C&C and $11 million at S&P Capital IQ / S&P Indices as revenue growth improved 9%, 8% and 11%, respectively. In addition, S&P Ratings had increased legal costs of $28 million as compared to the first nine months of 2011. These increases were offset by lower personnel costs at MHE of $21 million as a result of the restructuring actions taken in the fourth quarter of 2011, and lower selling and marketing expenses of $33 million given the reduced revenue opportunities in the adoption states.
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Mcgraw-hill Companies, Inc. has a market cap of $15.7 billion; its shares were traded at around $55.24 with a P/E ratio of 17.5 and P/S ratio of 2.5. The dividend yield of Mcgraw-hill Companies, Inc. stocks is 1.8%. Mcgraw-hill Companies, Inc. had an annual average earning growth of 7.9% over the past 10 years. GuruFocus rated Mcgraw-hill Companies, Inc. the business predictability rank of 2.5-star.
Highlight of Business Operations:
S&P Ratings — Revenue and operating profit for the quarter increased 22% and 24%, respectively, and for the first nine months increased 9% and 5%, respectively. Revenue growth was driven by record high-yield corporate bond issuance and increases in bank loan ratings and structured finance. The increase for the first nine months was also impacted by increases in public finance driven by strong municipal bond issuance in the United States. Operating profit increased compared to the quarter and first nine months of 2011 due the increases in revenue, partially offset primarily by higher incentive costs, Growth and Value Plan costs of $8 million and unfavorable foreign exchange rates. In addition, higher legal expenses impacted operating profit for the first nine months.Product revenue decreased $108 million or 11% as compared to the third quarter of 2011, primarily due to decreases at MHE from lower adoption state and open territory sales. Also contributing to the revenue reduction was a substantial increase in deferred revenue due to higher sales of programs that contain digital components that will be delivered over multiple years. Service revenue increased $153 million or 16% as compared to the third quarter of 2011, primarily due to increases in U.S. high-yield corporate bond issuance, growth in our global commodities products, increases in structured finance, growth for our Capital IQ product, growth in Global Data Solutions and recent acquisitions of R2 Technologies in February 2012, QuantHouse in April 2012 and CMA and the DJI business in June 2012. This was partially offset by declines in our construction business. See “Segment Review” below for further information.
During the quarter, we recorded $99 million of Growth and Value Plan related costs necessary to enable separation and reduce our cost structure, which primarily includes $50 million of restructuring charges and $40 million of professional fees. Excluding these costs, selling and general expenses increased $50 million or 9% as compared to the third quarter of 2011, primarily related to higher costs associated with increased sales and additional stock-based compensation mainly due to higher expected performance achievement and an increase in the grant price of our equity awards. Personnel costs, including incentive compensation, increased $25 million at S&P Ratings, $6 million at C&C and $3 million at S&P Capital IQ / S&P Indices as revenue growth improved 22%, 5% and 13%, respectively. These increases were partially offset by lower selling and marketing expenses of $9 million at MHE given the reduced revenue opportunities in the adoption states.
Operating-related expenses decreased $24 million or 1% as compared to the the first nine months of 2011, primarily driven by lower costs at MHE compared to the first nine months 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 $50 million in savings. This was partially offset by increased compensation costs at S&P Capital IQ / S&P Indices of $32 million or 16% and S&P Ratings of $13 million or 3%. These increases were primarily a result of global staff increases and higher personnel costs as noted above for the quarter.
During the first nine months of 2012, we recorded $174 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 increased $2 million as compared to the the first nine months of 2011, as higher costs associated with increased sales and additional stock-based compensation, mainly due to higher expected performance achievement and an increase in the grant price of our equity awards were offset by lower costs at MHE. Personnel costs increased $31 million at S&P Ratings, $21 million at C&C and $11 million at S&P Capital IQ / S&P Indices as revenue growth improved 9%, 8% and 11%, respectively. In addition, S&P Ratings had increased legal costs of $28 million as compared to the first nine months of 2011. These increases were offset by lower personnel costs at MHE of $21 million as a result of the restructuring actions taken in the fourth quarter of 2011, and lower selling and marketing expenses of $33 million given the reduced revenue opportunities in the adoption states.
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