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McGraw-Hill Consolidated Revenues for 2011 Grew by 3% – Operating Income Grew by 1%

Standard & Poor’s Ratings: Revenue in the fourth quarter decreased by 8% to $434 million, reflecting a decline in global credit markets. Excluding $9 million for severance costs for a workforce reduction of approximately 30 positions, operating profit declined by 24% to $156 million compared to the same period in 2010.

For the full-year 2011, revenue for Standard & Poor’s Ratings increased by 4% to $1.8 billion compared to 2010. Excluding fourth quarter restructuring charges, operating profit declined by 4% to $728 million compared to adjusted results for the same period in 2010, which excluded a $7 million gain on the sale of equity interests in India. Foreign exchange rates favorably affected revenue by $25 million and operating income by $12 million.

Revenue for S&P Capital IQ, which includes Integrated Desktop Solutions, Enterprise Solutions and Research & Analytics, increased by 8% in the fourth quarter to $268 million. Revenue for the full-year 2011 grew by 13% to $1 billion. Growth in subscriptions and platform enhancements enabled Capital IQ to gain share and increase its number of clients to more than 3,800 by the end of 2011, up 14% compared to 2010.

Commodities and Commercial: Revenue for these brands, formerly in the Information & Media segment, increased by 8% to $239 million in the fourth quarter compared to the same period last year. The name change is consistent with the Growth and Value Plan strategy, which included the divestiture of the Broadcasting Group. The fourth quarter and full-year results reflect the reclassification of the Broadcasting Group as a discontinued operation.

McGraw-Hill Education: Revenue grew by 4% or $20 million in the fourth quarter to $516 million compared to the same period in 2010.   For the year 2011, revenue declined by 6% to $2.3 billion compared to 2010. Excluding the fourth quarter restructuring charge, adjusted operating profit declined by 1% to $354 million from the prior year’s adjusted results, which excluded a $4 million gain on the sale of a secondary school business in Australia. Foreign exchange favorably affected revenue by $13 million and operating profit by $5 million.

“In 2011, despite challenging market conditions, we recorded the second best year in our history from continuing operations for revenue, operating profit and earnings per share,” said Harold McGraw III, chairman, president and chief executive officer of The McGraw-Hill Companies.  “A solid fourth quarter finish by S&P Capital IQ, S&P Indices, Platts and a market-beating performance in U.S. higher education enabled us to overcome volatile global credit markets and historically low funding levels in the U.S. elementary-high school market.”

“We are making progress in our Growth and Value Plan. We took important steps in 2011 to create two powerful companies, McGraw-Hill Financial and McGraw-Hill Education, with appropriate resources, and we started disaggregating shared services. In the fourth quarter, we eliminated approximately 800 positions across the company and realigned our benefit programs.  It’s the first wave in a number of steps to achieve our target of at least $100 million in cost reductions.” 

Outlook for 2012:  McGraw-Hill expects to see another challenging year in the global markets, but management is confident in the strength of its business, especially after a good year in 2011. It expects EPS earnings per share in the range of US$ 3.25 to 3.35 (US$ 2.91 in 2011).

One of the analysts on the earnings call commented that in light of the size of the company the targeted cost reduction program of US$ 100million may be too modest.

Source:  McGraw-Hill Companies

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