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| 1. | Basis of Presentation | |
| The accompanying unaudited financial statements of The McGraw-Hill Companies, Inc. (together with its consolidated subsidiaries, the “Company,” “we,” “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Therefore, the financial statements included herein should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2010 (our “Annual Report”). | ||
| In the opinion of management all normal recurring adjustments considered necessary for a fair statement of the results of the interim periods have been included. The operating results for the three and nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the full year, partially due to the seasonal nature of some of our businesses. As a result, we have included the Consolidated Balance Sheet as of September 30, 2010 for comparative purposes. Certain prior-year amounts have been reclassified to conform to the current presentation. | ||
| We have reported our Broadcasting Group within our McGraw-Hill Information & Media (“I&M”) segment, as a discontinued operation as of September 30, 2011. Accordingly, the results of operations for all periods presented have been reclassified to reflect the business as a discontinued operation and the assets and liabilities of the business have been reclassified as held for sale for the periods presented. See Note 2 for further discussion. | ||
| On September 12, 2011, we announced that our Board of Directors have unanimously approved a comprehensive Growth and Value Plan that includes separation into two public companies: McGraw-Hill Markets (the working name for this company), primarily focused on capital and commodities markets, and McGraw-Hill Education, focused on education services and digital learning. Management is developing detailed separation plans, which will be subject to approval by the Board of Directors. We expect to complete the transaction by the end of 2012 through a tax-free spin-off of the education business to the Company’s shareholders, subject to various conditions including final Board approval and a tax ruling from the Internal Revenue Service. | ||
| Our critical accounting estimates are disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, allowance for doubtful accounts and sales returns, inventories, prepublication costs, accounting for the impairment of long-lived assets (including other intangible assets), goodwill and indefinite-lived intangible assets, retirement plans and postretirement healthcare and other benefits, stock-based compensation, income taxes and contingencies. Since the date of our Annual Report, there have been no material changes to our critical accounting policies and estimates. |
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| 2. | Acquisitions and Divestitures | |
| Acquisitions | ||
| During the nine months ended September 30, 2011, we completed acquisitions aggregating approximately $199 million. None of our acquisitions were material either individually or in the aggregate, including the pro forma impact on earnings, and primarily included the following: |
| • | In July, we acquired the issued and outstanding shares of Steel Business Briefing Group (the “SBB Group”), a privately held U.K. company and leading provider of news, pricing and analytics to the global steel market. The SBB Group provides subscription-based, electronic products to the steel industry and its participants through two principal businesses, Steel Business Briefing and The Steel Index. The SBB Group is included within Platts, part of our I&M segment. In connection with the preliminary purchase price allocation, estimates of the fair values of long-lived and intangible assets have been determined utilizing currently available information and are subject to finalization. | ||
| • | In March, we acquired the assets of Bookette Software Company (“Bookette”). Bookette engages in the development of software and algorithms that are used to score and report educational tests for schools, districts, and states and other various educational systems and entities worldwide. Bookette is included within McGraw-Hill Education’s California Testing Board’s assessment business. | ||
| • | In January, we acquired all of the issued and outstanding membership interest units of Bentek Energy LLC (“Bentek”), which is included as part of our I&M segment. Bentek offers its customers a comprehensive portfolio of data, information and analytics products in the natural gas and liquids sector. The primary purpose of the acquisition was to acquire Bentek’s knowledge, skill and expertise in gathering high-quality detailed data and their ability to identify key relationships within the data critical to industry participants. |
| During the nine months ended September 30, 2010, we completed acquisitions aggregating approximately $325 million. None of our acquisitions were material either individually or in the aggregate, including the pro forma impact on earnings, and primarily included the following: |
| • | In September 2010, we acquired substantially all of the assets and certain liabilities of TheMarkets.com LLC, a company focused on providing real-time investment information to brokers and institutional investors. This acquisition is consistent with McGraw-Hill Financial’s focus on creating strategic value through providing access to investment research, data and analytics to customers that facilitates informed investment decisions. | ||
| • | In August 2010, we acquired a 1.3% interest in Ambow Education Holding Ltd. (“Ambow”), an education company headquartered and publicly traded in China that provides e-learning technologies and education services. Our investment in Ambow is part of our effort to expand our presence into emerging markets by strategically partnering with local businesses. This investment is accounted for as an available-for-sale security. | ||
| • | In April 2010, we made a $5.0 million contingent payment related to an acquisition in 2008, which is part of our McGraw-Hill Financial segment. |
| Divestitures | ||
| During the nine months ended September 30, 2011, we recorded a pre-tax gain of $13.2 million within other income in the Consolidated Statements of Income, which related to the sale of our interest in LinkedIn Corporation in their initial public offering. This investment was held within our I&M segment. | ||
| On October 3, 2011 we announced a definitive agreement to sell the Broadcasting Group to The E.W. Scripps Company for approximately $212 million in cash. We expect this transaction will close following the receipt of regulatory approvals and completion of customary closing conditions. This agreement followed our previously announced plan to pursue the divestiture of our Broadcasting Group, which is part of our I&M segment. | ||
| As a result of the definitive agreement, the results of operations for all periods presented have been reclassified to reflect the Broadcasting Group as a discontinued operation and the assets and liabilities of the business have been reclassified as held for sale. The key components of income (loss) from discontinued operations consist of the following for the periods ended September 30: |
| Three Months | Nine Months | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Revenue
|
$ | 22.4 | $ | 23.6 | $ | 66.8 | $ | 67.6 | ||||||||
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Costs and expenses
|
23.2 | 21.5 | 67.7 | 64.5 | ||||||||||||
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||||||||||||||||
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(Loss) income before taxes on income
|
(0.8 | ) | 2.1 | (0.9 | ) | 3.1 | ||||||||||
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Provision for taxes on income
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0.3 | 1.4 | 0.8 | 2.2 | ||||||||||||
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(Loss) income from discontinued operations, net of tax
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$ | (1.1 | ) | $ | 0.7 | $ | (1.7 | ) | $ | 0.9 | ||||||
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| The components of assets and liabilities classified as discontinued operations and included in prepaid and other current assets and other current liabilities in the Consolidated Balance Sheets consist of the following: |
| September 30, | December 31, | September 30, | ||||||||||
| 2011 | 2010 | 2010 | ||||||||||
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Accounts receivable, net
|
$ | 18.5 | $ | 17.8 | $ | 16.3 | ||||||
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Property and equipment, net
|
24.5 | 27.5 | 26.5 | |||||||||
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Other intangible assets, net
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45.9 | 47.6 | 48.2 | |||||||||
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Other assets
|
11.8 | 10.2 | 12.4 | |||||||||
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Assets held for sale
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$ | 100.7 | $ | 103.1 | $ | 103.4 | ||||||
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Accounts payable and accrued expenses
|
$ | 6.2 | $ | 9.4 | $ | 5.9 | ||||||
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Other liabilities
|
8.4 | 9.3 | 9.5 | |||||||||
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Liabilities held for sale
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$ | 14.6 | $ | 18.7 | $ | 15.4 | ||||||
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| During the nine months ended September 30, 2010, we recorded a pre-tax gain of $11.1 million within other income in the Consolidated Statements of Income, which was primarily comprised of the following: |
| • | In September 2010, we sold certain equity interests which were a part of our S&P segment, and recognized a pre-tax gain of $7.3 million. The gain was primarily from the sale of an equity interest in an Indian commodity exchange that was made to comply with local regulations discouraging foreign-based entities from owning an interest in local Indian exchanges in excess of 5%. |
| • | In August 2010, we sold our Australian secondary education business and recognized a pre-tax gain of $3.8 million. The divestiture was part of McGraw-Hill Education’s strategic initiative to divest from slow growth or retracting markets. |
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| 3. | Supplementary Balance Sheet Data |
| September 30, | December 31, | September 30, | ||||||||||
| 2011 | 2010 | 2010 | ||||||||||
|
Accounts receivable — allowance for doubtful accounts
|
$ | 63.7 | $ | 78.0 | $ | 74.1 | ||||||
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Accounts receivable — allowance for sales returns
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233.2 | 197.3 | 241.8 | |||||||||
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Prepublication costs — accumulated amortization
|
1,038.4 | 1,089.3 | 1,057.8 | |||||||||
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Property and equipment — accumulated depreciation
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1,056.8 | 1,009.2 | 997.2 | |||||||||
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| 4. | Fair Value Measurements |
| In accordance with authoritative guidance for fair value measurements, certain assets and liabilities are required to be recorded at fair value and classified within a fair value hierarchy based on inputs used when measuring fair value. We have investments in equity securities classified as available-for-sale and an immaterial amount of forward exchange contracts that are adjusted to fair value on a recurring basis. The fair values of our investments in available-for-sale securities were determined using quoted market prices from daily exchange traded markets and are classified within Level 1 of the valuation hierarchy. The fair values of our available-for-sale securities are $13.5 million and $22.6 million as of September 30, 2011 and December 31, 2010, respectively, and are included in other non-current assets in the Consolidated Balance Sheets. | ||
| Other financial instruments, including cash and equivalents and short-term investments, are recorded at cost, which approximates fair value. The fair value of our long-term borrowings is $1.3 billion as of September 30, 2011 and December 31, 2010, and was estimated based on quoted market prices. |
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| 5. | Income Taxes |
| For the three and nine months ended September 30, 2011 and 2010, the effective tax rate for continuing operations was 36.3%. Including discontinued operations, the effective tax rate was 36.4% for the three and nine months ended September 30, 2011 and 2010. | ||
| At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our ordinary quarterly earnings. The tax expense or benefit related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect, and are individually computed, are recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws or rates or tax status is recognized in the interim period in which the change occurs. | ||
| As of September 30, 2011 and December 31, 2010, the total amount of federal, state and local, and foreign unrecognized tax benefits was $63.1 million and $52.9 million, respectively, exclusive of interest and penalties. We recognize accrued interest and penalties related to unrecognized tax benefits in interest expense and operating expense, respectively. In addition to the unrecognized tax benefits, as of September 30, 2011 and December 31, 2010, we had $15.5 million and $14.3 million, respectively, of accrued interest and penalties associated with uncertain tax positions. |
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| 6. | Debt |
| September 30, | December 31, | September 30, | ||||||||||
| 2011 | 2010 | 2010 | ||||||||||
|
5.375%
Senior Notes, due 2012
1
|
$ | 399.9 | $ | 399.9 | $ | 399.9 | ||||||
|
5.9% Senior Notes, due 2017 2
|
399.4 | 399.3 | 399.3 | |||||||||
|
6.55% Senior Notes, due 2037 3
|
398.6 | 398.6 | 398.6 | |||||||||
|
Note payable
|
0.1 | 0.5 | 0.1 | |||||||||
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Total debt
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1,198.0 | 1,198.3 | 1,197.9 | |||||||||
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|
Less: short-term debt including current maturities
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0.0 | 0.3 | 0.0 | |||||||||
|
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|
Long-term debt
|
$ | 1,198.0 | $ | 1,198.0 | $ | 1,197.9 | ||||||
|
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| 1 | Interest payments are due on February 15 and August 15, and, as of September 30, 2011, the unamortized debt discount is $0.1 million. These Notes will mature on November 15, 2012. | |
| 2 | Interest payments are due on April 15 and October 15, and, as of September 30, 2011, the unamortized debt discount is $0.6 million. | |
| 3 | Interest payments are due on May 15 and November 15, and, as of September 30, 2011, the unamortized debt discount is $1.4 million. |
| Currently, we have the ability to borrow $1.2 billion in additional funds through our commercial paper program, which is supported by our $1.2 billion three-year credit agreement (our “credit facility”) that will terminate on July 30, 2013. We pay a commitment fee of 15.0 to 35.0 basis points for our credit facility, depending on our credit rating, whether or not amounts have been borrowed and currently pay a commitment fee of 20.0 basis points. The interest rate on borrowings under our credit facility is, at our option, calculated using rates that are primarily based on either the prevailing London Inter-Bank Offer Rate, the prime rate determined by the administrative agent or the Federal funds rate. For certain borrowings under this credit facility there is also a spread based on our credit rating added to the applicable rate. As of September 30, 2011, we have not utilized our credit facility for additional funds. | ||
| Our credit facility contains certain covenants. The only financial covenant requires that our indebtedness to cash flow ratio, as defined in our credit facility, is not greater than 4 to 1, and this covenant has never been exceeded. | ||
| Historically, we have also had the ability to borrow additional funds through Extendible Commercial Notes and a promissory note with one of our providers of banking services, however, effective April of 2011, we have canceled these notes since there is no current market for them. |
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| 7. | Employee Benefits |
| We have a number of defined benefit pension plans and defined contribution plans covering substantially all employees. Our primary pension plan is a noncontributory plan under which benefits are based on employee career employment compensation. We also have unfunded non-U.S. benefit plans and supplemental benefit plans. The supplemental benefit plans provide senior management with supplemental retirement, disability and death benefits. In addition, we sponsor voluntary 401(k) plans under which we may match employee contributions up to certain levels of compensation as well as profit-sharing plans under which we contribute a percentage of eligible employees’ compensation to the employees’ accounts. | ||
| We also provide certain medical, dental and life insurance benefits for retired employees and eligible dependents. The medical and dental plans are contributory, while the life insurance plan is noncontributory. We currently do not prefund any of these plans. | ||
| The components of net periodic benefit cost for our retirement plans and post-retirement plans for the periods ended September 30 are as follows: |
| Three Months | Nine Months | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Retirement Plans
|
||||||||||||||||
|
Service cost
|
$ | 16.7 | $ | 15.2 | $ | 50.2 | $ | 45.8 | ||||||||
|
Interest cost
|
24.9 | 23.5 | 74.5 | 70.4 | ||||||||||||
|
Expected return on plan assets
|
(31.8 | ) | (27.9 | ) | (95.5 | ) | (83.6 | ) | ||||||||
|
Amortization of prior service credit
|
(0.1 | ) | — | (0.3 | ) | (0.1 | ) | |||||||||
|
Amortization of actuarial loss
|
7.7 | 3.7 | 23.0 | 11.1 | ||||||||||||
|
|
||||||||||||||||
|
Net periodic benefit cost
|
$ | 17.4 | $ | 14.5 | $ | 51.9 | $ | 43.6 | ||||||||
|
|
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|
|
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|
Post-Retirement Plans
|
||||||||||||||||
|
Service cost
|
$ | 0.6 | $ | 0.7 | $ | 2.0 | $ | 1.9 | ||||||||
|
Interest cost
|
1.2 | 1.8 | 4.6 | 5.5 | ||||||||||||
|
Amortization of prior service credit
|
(0.3 | ) | (0.3 | ) | (0.9 | ) | (0.9 | ) | ||||||||
|
Amortization of actuarial gain
|
(0.1 | ) | — | — | — | |||||||||||
|
|
||||||||||||||||
|
Net periodic benefit cost
|
$ | 1.4 | $ | 2.2 | $ | 5.7 | $ | 6.5 | ||||||||
|
|
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| As discussed in our Annual Report, we changed certain discount rate assumptions on our retirement and post-retirement plans, which became effective on January 1, 2011. The effect of the assumption changes on retirement and post-retirement expense for the three and nine months ended September 30, 2011 did not have a material impact to our financial position, results of operations or cash flows. | ||
| In the first nine months of 2011, we contributed $21.8 million to our retirement plans and expect to make additional required contributions of approximately $6 million to our retirement plans during the remainder of the year. We may elect to make additional non-required contributions depending on investment performance and the pension plan status in the fourth quarter of 2011. |
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| 8. | Stock-Based Compensation |
| We issue stock-based incentive awards to our eligible employees and Directors under two employee stock ownership plans (the 1993 and 2002 Employee Stock Incentive Plans) and a Director Deferred Stock Ownership Plan. No further awards may be granted under the 1993 Employees Stock Incentive Plan, although awards granted under this plan remain outstanding in accordance with their terms. The 2002 Employee Stock Incentive Plan permits the granting of nonqualified stock options, stock appreciation rights, performance stock, restricted stock and other stock-based awards. | ||
| Stock-based compensation for the periods ended September 30 is as follows: |
| Three Months | Nine Months | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Stock option expense
|
$ | 6.0 | $ | 5.8 | $ | 17.6 | $ | 16.0 | ||||||||
|
Restricted stock and unit awards expense
|
17.3 | 15.7 | 46.3 | 28.2 | ||||||||||||
|
|
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|
Total stock-based compensation expense
|
$ | 23.3 | $ | 21.5 | $ | 63.9 | $ | 44.2 | ||||||||
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|
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| As of September 30, 2011 and December 31, 2010, we issued 3.6 million and 1.8 million common shares, respectively, upon exercise of certain stock options outstanding. |
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| 9. | Equity |
| Stock Repurchases | ||
| In 2007 the Board of Directors approved a stock repurchase program authorizing the purchase of up to 45.0 million shares (the “2007 Repurchase Program”). On June 29, 2011, the Board of Directors approved a new stock repurchase program authorizing the purchase of up to 50.0 million shares (the “2011 Repurchase Program”), which was approximately 17% of the total shares of our outstanding common stock at that time. Share repurchases under both the 2007 and the 2011 Repurchase Programs for the periods ended September 30 were as follows: |
| 2011 | 2010 | |||||||||||||||||||||||
| Total | Total | |||||||||||||||||||||||
| number of | Average | number of | Average | |||||||||||||||||||||
| shares | price paid | Total cash | shares | price paid | Total cash | |||||||||||||||||||
| purchased | per share1 | utilized2 | purchased | per share | utilized | |||||||||||||||||||
|
Three months
|
9.0 | $ | 39.40 | $ | 354.7 | 2.2 | $ | 31.14 | $ | 69.0 | ||||||||||||||
|
Nine months
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16.7 | $ | 39.20 | $ | 655.0 | 8.7 | $ | 29.37 | $ | 255.8 | ||||||||||||||
| 1 | In June of 2011, we repurchased approximately 2.5 million shares under our 2007 Repurchase Program from the holdings of the Harold W. McGraw, Jr. Trust (the “Trust”) and the Harold W. McGraw, Jr. Family Foundation, Inc., a Connecticut non-stock corporation (the “Foundation”). The shares were purchased at a discount of 1.375% from the June 23, 2011 New York Stock Exchange closing price through a private transaction with the trustees of the Trust and the Board of Directors of the Foundation. We repurchased these shares with cash for $97.0 million. Without this discounted repurchase, the average price paid per share for the nine months ended September 30, 2011 would have been $39.14. The transaction was approved by the Nomination and Corporate Governance and Financial Policy Committees of our Board of Directors and we received independent financial and legal advice for this transaction. | |
| 2 | In any period, cash used in financing activities related to common stock repurchased may differ from the comparable change in equity, reflecting timing differences between the recognition of share repurchase transactions and their settlement for cash. As such, in the third quarter of 2011, 0.5 million shares were repurchased for $19.4 million, which settled in October 2011. |
| Our purchased shares may be used for general corporate purposes, including the issuance of shares for stock compensation plans and to offset the dilutive effect of the exercise of employee stock options. During the three and nine months ended September 30, 2011, we repurchased 0.7 and 8.4 million shares, respectively, under the 2007 Repurchase Program. As of September 30, 2011, there were no remaining shares available under the 2007 Repurchase Program. During the three and nine months ended September 30, 2011, we repurchased 8.3 million shares under the 2011 Repurchase Program. As of September 30, 2011, 41.7 million shares remained available under the 2011 Repurchase Program. The 2011 Repurchase Program has no expiration date and purchases under this program may be made from time to time on the open market and in private transactions, depending on market conditions. |
| Comprehensive Income | ||
| The following table is a reconciliation of net income to comprehensive income, including comprehensive income attributable to our noncontrolling interests (“NCI”), for the periods ended September 30: |
| Three Months | Nine Months | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Net income
|
$ | 373.9 | $ | 389.7 | $ | 713.8 | $ | 690.9 | ||||||||
|
Other comprehensive income, net of tax:
|
||||||||||||||||
|
Foreign currency translation adjustment
|
(57.1 | ) | 24.1 | (23.3 | ) | 4.1 | ||||||||||
|
Pension and other postretirement benefit plans
|
4.6 | 2.1 | 19.1 | 10.8 | ||||||||||||
|
Unrealized loss on investment and forward exchange contracts
|
(0.1 | ) | (0.1 | ) | (6.2 | ) | (0.3 | ) | ||||||||
|
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|
Comprehensive income
|
321.3 | 415.8 | 703.4 | 705.5 | ||||||||||||
|
Less: comprehensive income attributable to NCI
|
(1.8 | ) | (10.0 | ) | (12.3 | ) | (19.2 | ) | ||||||||
|
|
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Comprehensive income attributable to the Company
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$ | 319.5 | $ | 405.8 | $ | 691.1 | $ | 686.3 | ||||||||
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| 10. | Earnings Per Share |
| Basic earnings per common share (“EPS”) is computed by dividing net income attributable to the common shareholders of the Company by the weighted-average number of common shares outstanding. Diluted EPS is computed in the same manner as basic EPS, except the number of shares is increased to include additional common shares that would have been outstanding if potential common shares with a dilutive effect had been issued. Potential common shares consist primarily of stock options, restricted stock and restricted stock units calculated using the treasury stock method. The calculation for basic and diluted EPS for the periods ended September 30 is as follows: |
| Three Months | Nine Months | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Amounts attributable to The McGraw-Hill Companies, Inc.
common shareholders:
|
||||||||||||||||
|
Income from continuing operations
|
$ | 366.7 | $ | 379.2 | $ | 698.3 | $ | 673.3 | ||||||||
|
Loss from discontinued operations, net of tax
|
(1.1 | ) | 0.7 | (1.7 | ) | 0.9 | ||||||||||
|
|
||||||||||||||||
|
Net income attributable to the Company
|
$ | 365.6 | $ | 379.9 | $ | 696.6 | $ | 674.2 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Basic weighted-average number of common shares outstanding
|
297.8 | 307.2 | 302.2 | 310.6 | ||||||||||||
|
Effect of stock options and other dilutive securities
|
5.8 | 2.1 | 5.2 | 2.3 | ||||||||||||
|
|
||||||||||||||||
|
Diluted weighted-average number of common shares outstanding
|
303.6 | 309.3 | 307.4 | 312.9 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Basic EPS:
|
||||||||||||||||
|
Income from continuing operations
|
$ | 1.23 | $ | 1.23 | $ | 2.31 | $ | 2.17 | ||||||||
|
Loss from discontinued operations, net of tax
|
— | 0.01 | $ | — | — | |||||||||||
|
|
||||||||||||||||
|
Net income
|
$ | 1.23 | $ | 1.24 | $ | 2.31 | $ | 2.17 | ||||||||
|
|
||||||||||||||||
|
Diluted EPS:
|
||||||||||||||||
|
Income from continuing operations
|
$ | 1.21 | $ | 1.23 | $ | 2.27 | $ | 2.15 | ||||||||
|
Loss from discontinued operations, net of tax
|
— | — | — | — | ||||||||||||
|
|
||||||||||||||||
|
Net income
|
$ | 1.21 | $ | 1.23 | $ | 2.27 | $ | 2.15 | ||||||||
|
|
||||||||||||||||
| Restricted performance shares outstanding of 1.6 million and 3.2 million as of September 30, 2011 and September 30, 2010, respectively, were not included in the computation of diluted EPS because the necessary vesting conditions had not been met. | ||
| The effect of the potential exercise of stock options is excluded from the computation of diluted EPS when the average market price of our common stock is lower than the exercise price of the related option during the period because the effect would have been antidilutive. For the three months ended September 30, 2011 and 2010, the number of stock options excluded from the computation was 9.9 million and 24.4 million, respectively, and 10.2 million and 23.9 million for the nine months ended September 30, 2011 and 2010, respectively. |
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| 11. | Restructuring |
| During the fourth quarter of 2010, we initiated a restructuring plan within our I&M segment as a result of business conditions at that time, as well as continuing process improvements. We recorded a pre-tax restructuring charge of $10.6 million, consisting primarily of employee severance costs related to a workforce reduction of approximately 230 positions. For the three and nine months ended September 30, 2011, we have reduced the reserve related to the 2010 restructuring by $1.3 million and $6.6 million, respectively, primarily relating to cash payments for employee severance costs. The remaining reserve as of September 30, 2011 is $2.2 million and is included in other current liabilities in the Consolidated Balance Sheet. | ||
| As of September 30, 2011, our 2008 and 2006 restructuring initiatives still have remaining reserves relating to facilities costs of $0.4 million and $4.0 million, respectively. |
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|||
| 12. | Segment and Related Information |
| We have four reportable segments: Standard & Poor’s (“S&P”), McGraw-Hill Financial (“MH Financial”), McGraw-Hill Education (“MHE”) and McGraw-Hill Information & Media (“I&M”). |
| • | S&P is the world’s foremost provider of credit ratings providing investors with information and independent ratings benchmarks for their investment and financial decisions. | ||
| • | MH Financial is a leading global provider of digital and traditional research and analytical tools for investment advisors, wealth managers and institutional investors. | ||
| • | MHE is a leading global provider of educational materials, information and solutions serving the elementary and high school, college, professional, international and adult education markets. | ||
| • | I&M consists of business-to-business and business-to-consumer companies, each an expert in its industry, that deliver their customers access to actionable data and analytics. The Broadcasting Group has historically been part of the I&M segment. In accordance with the presentation of the Broadcasting Group as discontinued operations, the results of operations for all periods presented have been reclassified to reflect this change. See Note 2 for further discussion. |
| The Executive Committee, consisting of our principal corporate executives, is our chief operating decision-maker and evaluates performance of our segments and allocates resources based primarily on operating income. A summary of operating results by segment for the periods ended September 30 is as follows: |
| 2011 | 2010 | |||||||||||||||
| Operating | Operating | |||||||||||||||
| Three Months | Revenue | Income | Revenue | Income | ||||||||||||
|
S&P
|
$ | 409.9 | $ | 169.1 | $ | 417.5 | $ | 187.3 | ||||||||
|
MH Financial
|
348.5 | 112.6 | 294.3 | 85.8 | ||||||||||||
|
MHE
|
937.3 | 314.7 | 1,054.7 | 357.5 | ||||||||||||
|
I&M
|
228.5 | 51.3 | 204.1 | 43.8 | ||||||||||||
|
Intersegment elimination
|
(16.2 | ) 1 | — | (14.4 | ) 1 | — | ||||||||||
|
|
||||||||||||||||
|
Total operating segments
|
1,908.0 | 647.7 | 1,956.2 | 674.4 | ||||||||||||
|
|
||||||||||||||||
|
General corporate expense
|
— | (40.9 | ) | — | (44.4 | ) | ||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 1,908.0 | $ | 606.8 | $ | 1,956.2 | $ | 630.0 | ||||||||
|
|
||||||||||||||||
| 2011 | 2010 | |||||||||||||||
| Operating | Operating | |||||||||||||||
| Nine Months | Revenue | Income | Revenue | Income | ||||||||||||
|
S&P
|
$ | 1,333.1 | $ | 572.2 | $ | 1,223.8 | $ | 557.5 | ||||||||
|
MH Financial
|
1,005.9 | 306.7 | 866.8 | 240.3 | ||||||||||||
|
MHE
|
1,776.6 | 281.4 | 1,936.9 | 347.3 | ||||||||||||
|
I&M
|
657.6 | 139.1 | 590.4 | 118.0 | ||||||||||||
|
Intersegment elimination
|
(46.8 | )1 | — | (41.3 | )1 | — | ||||||||||
|
|
||||||||||||||||
|
Total operating segments
|
4,726.4 | 1,299.4 | 4,576.6 | 1,263.1 | ||||||||||||
|
|
||||||||||||||||
|
General corporate expense
|
— | (119.3 | ) | — | (117.7 | ) | ||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 4,726.4 | $ | 1,180.1 | $ | 4,576.6 | $ | 1,145.4 | ||||||||
|
|
||||||||||||||||
| 1 | Revenue for S&P and expenses for MH Financial include an intersegment royalty charged to MH Financial for the rights to use and distribute content and data developed by S&P. |
| See Note 2 — Acquisitions and Divestitures, and Note 11 — Restructuring for actions that impacted the segment operating results. |
|
|||
| 13. | Commitments and Contingencies |
| Rental Expense and Lease Obligations | ||
| As of September 30, 2011, the remaining deferred gain related to our sale-leaseback transaction with Rock-McGraw, Inc. was $139.0 million as $3.0 million and $8.8 million was amortized during the three and nine months ended September 30, 2011, respectively. Interest expense associated with this operating lease for the three and nine months ended September 30, 2011 was $1.6 million and $5.0 million, respectively. | ||
| Legal Matters | ||
| The following amends the disclosure in Note 13 — Commitments and Contingencies to the Consolidated Financial Statements of our Annual Report. |
| • | In connection with the Parmalat matter, on June 29, 2011, the Court issued its final decision dismissing in its entirety Parmalat’s main damages claim which was based on the value of the bonds issued. The Court ordered S&P to pay Parmalat the sum of approximately euros 784,000 (approximately $1.1 million), representing the amount of ratings fees paid to S&P by Parmalat, plus interest from the date of service of the Writ of Summons. The Court also ordered S&P to reimburse Parmalat for euros 47,390 (less than $0.1 million) in trial costs. The deadline for any party to file an appeal is the earlier of one year and 45 days from the date the judgment was issued or 30 days after any party serves a copy of the judgment on another party. | ||
| • | In connection with the Reed matter, on May 31, 2011 the Court granted Reed’s motion to file a Second Amended Complaint that, among other things, adds a false advertising claim under the Lanham Act, including a demand for treble damages and attorneys’ fees. The Second Amended Complaint also contains allegations purporting to further support Reed’s existing tort and antitrust claims. On June 3, 2011, the Court granted the Company’s motion to file a counterclaim against Reed alleging, among other things, that Reed misappropriated the Company’s trade secrets and engaged in unfair competition as a result of Reed’s recruitment of former employees of the Company and use of information about the Company’s customers obtained from the former employees to solicit those customers. | ||
| • | The Company and Standard & Poor’s Ratings Services, together with other credit rating agencies, have been named in numerous lawsuits in U.S. State and Federal Courts, as well as in foreign jurisdictions, relating to the ratings activity of Standard & Poor’s Ratings Services brought by alleged purchasers and issuers of rated securities, many of which include novel claims that Standard & Poor’s Ratings Services is an “underwriter” or “seller” of such securities under the Securities Act of 1933. The Company and Standard & Poor’s Ratings Services have also received numerous subpoenas and other government inquiries concerning the rating activity of Standard & Poor’s Ratings Services in these areas and continue to respond to all such requests. Additional actions, investigations or proceedings may be initiated from time to time in the future. | ||
| • | In connection with the Sullivan and Gearren matters, on October 19, 2011, the Court of Appeals for the Second Circuit affirmed the dismissal of those cases in their entirety. | ||
| • | As previously reported in the Company’s Form 8-K filed on September 26, 2011 the Company received on September 22, 2011 a “Wells Notice” from the staff of the U.S. Securities and Exchange Commission (the “Commission”) stating that the staff is considering recommending that the Commission institute a civil injunctive action against Standard & Poor’s Ratings Services, then a division of the Company (“S&P”), alleging violations of federal securities laws with respect to S&P’s ratings for a particular 2007 offering of collateralized debt obligations, known as “Delphinus CDO 2007-1”. The Wells Notice is neither a formal allegation nor a finding of wrongdoing. It allows its recipients the opportunity to provide their perspective and to address the issues raised by the staff before any decision is made by the Commission on whether to authorize the commencement of an enforcement proceeding against its recipients. S&P has responded to the staff presenting its position on the issues raised and why the Commission should not commence enforcement proceedings. |
| The Company believes that the claims asserted in the proceedings described above have no basis and they will be vigorously defended by the Company and/or the subsidiaries involved. |
| In view of the inherent difficulty of predicting the outcome of legal matters, particularly where the claimants seek very large or indeterminate damages, or where the cases present novel legal theories, involve a large number of parties or are in early stages of discovery, we cannot state with confidence what the eventual outcome of these pending matters will be, what the timing of the ultimate resolution of these matters will be or what the eventual loss, fines, penalties or impact related to each pending matter may be. We believe, based on our current knowledge, the outcome of the legal actions, proceedings and investigations currently pending should not have a material, adverse effect to the Company’s financial position, results of operations or cash flows. |
|
|||
| 14. | Recently Issued or Adopted Accounting Standards |
| Recently Issued |
| In September 2011, the Financial Accounting Standards Board (“FASB”) issued guidance that simplified how an entity tests goodwill for impairment. The revised guidance provides an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment. Under the revised guidance, an entity is permitted to first assess qualitative factors to determine whether goodwill impairment exists prior to performing analyses comparing the fair value of a reporting unit to its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. The guidance will be effective for us beginning January 1, 2012; however, early adoption is permitted. We intend on adopting the FASB’s guidance early and do not believe the adoption of the guidance will have a significant impact on our financial position, results of operations or cash flows. | ||
| In May 2011, the FASB issued new guidance for fair value measurements intended to achieve common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards. The amended guidance provides a consistent definition of fair value to ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. The amended guidance changes certain fair value measurement principles and enhances the disclosure requirements, particularly for Level 3 fair value measurements. The amended guidance will be effective for us beginning January 1, 2012. We do not anticipate that these changes will have a significant impact on our financial position, results of operations or cash flows. | ||
| In June 2011, the FASB issued guidance that modified how comprehensive income is presented in an entity’s financial statements. The guidance issued requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements and eliminates the option to present the components of other comprehensive income as part of the statement of equity. The revised financial statement presentation for comprehensive income will be effective for us beginning January 1, 2012, with early adoption permitted. | ||
| Recently Adopted | ||
| In December 2010, the FASB revised its guidance for disclosure requirements of supplementary pro forma information for business combinations. The objective of the revised guidance is to address diversity in practice regarding proforma disclosures for revenue and earnings of an acquired entity and specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments, which went into effect on January 1, 2011, will be adhered to any future material business combinations. | ||
| On January 1, 2011, we adopted guidance issued by the FASB on revenue recognition. Under the new guidance, when vendor specific objective evidence or third party evidence of the selling price for a deliverable in a multiple element arrangement cannot be determined, a best estimate of the selling price is required to allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing of when revenue is recognized. Adoption of the new guidance did not have a material impact to our financial position, results of operations or cash flows. |
|
|||
| In September 2011, the Financial Accounting Standards Board (“FASB”) issued guidance that simplified how an entity tests goodwill for impairment. The revised guidance provides an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment. Under the revised guidance, an entity is permitted to first assess qualitative factors to determine whether goodwill impairment exists prior to performing analyses comparing the fair value of a reporting unit to its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. The guidance will be effective for us beginning January 1, 2012; however, early adoption is permitted. We intend on adopting the FASB’s guidance early and do not believe the adoption of the guidance will have a significant impact on our financial position, results of operations or cash flows. |
| In May 2011, the FASB issued new guidance for fair value measurements intended to achieve common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards. The amended guidance provides a consistent definition of fair value to ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. The amended guidance changes certain fair value measurement principles and enhances the disclosure requirements, particularly for Level 3 fair value measurements. The amended guidance will be effective for us beginning January 1, 2012. We do not anticipate that these changes will have a significant impact on our financial position, results of operations or cash flows. |
| In June 2011, the FASB issued guidance that modified how comprehensive income is presented in an entity’s financial statements. The guidance issued requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements and eliminates the option to present the components of other comprehensive income as part of the statement of equity. The revised financial statement presentation for comprehensive income will be effective for us beginning January 1, 2012, with early adoption permitted. |
| In December 2010, the FASB revised its guidance for disclosure requirements of supplementary pro forma information for business combinations. The objective of the revised guidance is to address diversity in practice regarding proforma disclosures for revenue and earnings of an acquired entity and specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments, which went into effect on January 1, 2011, will be adhered to any future material business combinations. |
| On January 1, 2011, we adopted guidance issued by the FASB on revenue recognition. Under the new guidance, when vendor specific objective evidence or third party evidence of the selling price for a deliverable in a multiple element arrangement cannot be determined, a best estimate of the selling price is required to allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing of when revenue is recognized. Adoption of the new guidance did not have a material impact to our financial position, results of operations or cash flows. |
|
|||
| Three Months | Nine Months | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Revenue
|
$ | 22.4 | $ | 23.6 | $ | 66.8 | $ | 67.6 | ||||||||
|
Costs and expenses
|
23.2 | 21.5 | 67.7 | 64.5 | ||||||||||||
|
|
||||||||||||||||
|
(Loss) income before taxes on income
|
(0.8 | ) | 2.1 | (0.9 | ) | 3.1 | ||||||||||
|
Provision for taxes on income
|
0.3 | 1.4 | 0.8 | 2.2 | ||||||||||||
|
|
||||||||||||||||
|
(Loss) income from discontinued operations, net of tax
|
$ | (1.1 | ) | $ | 0.7 | $ | (1.7 | ) | $ | 0.9 | ||||||
|
|
||||||||||||||||
| The components of assets and liabilities classified as discontinued operations and included in prepaid and other current assets and other current liabilities in the Consolidated Balance Sheets consist of the following: |
| September 30, | December 31, | September 30, | ||||||||||
| 2011 | 2010 | 2010 | ||||||||||
|
Accounts receivable, net
|
$ | 18.5 | $ | 17.8 | $ | 16.3 | ||||||
|
Property and equipment, net
|
24.5 | 27.5 | 26.5 | |||||||||
|
Other intangible assets, net
|
45.9 | 47.6 | 48.2 | |||||||||
|
Other assets
|
11.8 | 10.2 | 12.4 | |||||||||
|
|
||||||||||||
|
Assets held for sale
|
$ | 100.7 | $ | 103.1 | $ | 103.4 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Accounts payable and accrued expenses
|
$ | 6.2 | $ | 9.4 | $ | 5.9 | ||||||
|
Other liabilities
|
8.4 | 9.3 | 9.5 | |||||||||
|
|
||||||||||||
|
Liabilities held for sale
|
$ | 14.6 | $ | 18.7 | $ | 15.4 | ||||||
|
|
||||||||||||
|
|||
| September 30, | December 31, | September 30, | ||||||||||
| 2011 | 2010 | 2010 | ||||||||||
|
Accounts receivable — allowance for doubtful accounts
|
$ | 63.7 | $ | 78.0 | $ | 74.1 | ||||||
|
Accounts receivable — allowance for sales returns
|
233.2 | 197.3 | 241.8 | |||||||||
|
Prepublication costs — accumulated amortization
|
1,038.4 | 1,089.3 | 1,057.8 | |||||||||
|
Property and equipment — accumulated depreciation
|
1,056.8 | 1,009.2 | 997.2 | |||||||||
|
|||
| September 30, | December 31, | September 30, | ||||||||||
| 2011 | 2010 | 2010 | ||||||||||
|
5.375%
Senior Notes, due 2012
1
|
$ | 399.9 | $ | 399.9 | $ | 399.9 | ||||||
|
5.9% Senior Notes, due 2017 2
|
399.4 | 399.3 | 399.3 | |||||||||
|
6.55% Senior Notes, due 2037 3
|
398.6 | 398.6 | 398.6 | |||||||||
|
Note payable
|
0.1 | 0.5 | 0.1 | |||||||||
|
|
||||||||||||
|
Total debt
|
1,198.0 | 1,198.3 | 1,197.9 | |||||||||
|
|
||||||||||||
|
Less: short-term debt including current maturities
|
0.0 | 0.3 | 0.0 | |||||||||
|
|
||||||||||||
|
Long-term debt
|
$ | 1,198.0 | $ | 1,198.0 | $ | 1,197.9 | ||||||
|
|
||||||||||||
| 1 | Interest payments are due on February 15 and August 15, and, as of September 30, 2011, the unamortized debt discount is $0.1 million. These Notes will mature on November 15, 2012. | |
| 2 | Interest payments are due on April 15 and October 15, and, as of September 30, 2011, the unamortized debt discount is $0.6 million. | |
| 3 | Interest payments are due on May 15 and November 15, and, as of September 30, 2011, the unamortized debt discount is $1.4 million. |
|
|||
| Three Months | Nine Months | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Retirement Plans
|
||||||||||||||||
|
Service cost
|
$ | 16.7 | $ | 15.2 | $ | 50.2 | $ | 45.8 | ||||||||
|
Interest cost
|
24.9 | 23.5 | 74.5 | 70.4 | ||||||||||||
|
Expected return on plan assets
|
(31.8 | ) | (27.9 | ) | (95.5 | ) | (83.6 | ) | ||||||||
|
Amortization of prior service credit
|
(0.1 | ) | — | (0.3 | ) | (0.1 | ) | |||||||||
|
Amortization of actuarial loss
|
7.7 | 3.7 | 23.0 | 11.1 | ||||||||||||
|
|
||||||||||||||||
|
Net periodic benefit cost
|
$ | 17.4 | $ | 14.5 | $ | 51.9 | $ | 43.6 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Post-Retirement Plans
|
||||||||||||||||
|
Service cost
|
$ | 0.6 | $ | 0.7 | $ | 2.0 | $ | 1.9 | ||||||||
|
Interest cost
|
1.2 | 1.8 | 4.6 | 5.5 | ||||||||||||
|
Amortization of prior service credit
|
(0.3 | ) | (0.3 | ) | (0.9 | ) | (0.9 | ) | ||||||||
|
Amortization of actuarial gain
|
(0.1 | ) | — | — | — | |||||||||||
|
|
||||||||||||||||
|
Net periodic benefit cost
|
$ | 1.4 | $ | 2.2 | $ | 5.7 | $ | 6.5 | ||||||||
|
|
||||||||||||||||
|
|||
| Three Months | Nine Months | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Stock option expense
|
$ | 6.0 | $ | 5.8 | $ | 17.6 | $ | 16.0 | ||||||||
|
Restricted stock and unit awards expense
|
17.3 | 15.7 | 46.3 | 28.2 | ||||||||||||
|
|
||||||||||||||||
|
Total stock-based compensation expense
|
$ | 23.3 | $ | 21.5 | $ | 63.9 | $ | 44.2 | ||||||||
|
|
||||||||||||||||
|
|||
| 2011 | 2010 | |||||||||||||||||||||||
| Total | Total | |||||||||||||||||||||||
| number of | Average | number of | Average | |||||||||||||||||||||
| shares | price paid | Total cash | shares | price paid | Total cash | |||||||||||||||||||
| purchased | per share1 | utilized2 | purchased | per share | utilized | |||||||||||||||||||
|
Three months
|
9.0 | $ | 39.40 | $ | 354.7 | 2.2 | $ | 31.14 | $ | 69.0 | ||||||||||||||
|
Nine months
|
16.7 | $ | 39.20 | $ | 655.0 | 8.7 | $ | 29.37 | $ | 255.8 | ||||||||||||||
| 1 | In June of 2011, we repurchased approximately 2.5 million shares under our 2007 Repurchase Program from the holdings of the Harold W. McGraw, Jr. Trust (the “Trust”) and the Harold W. McGraw, Jr. Family Foundation, Inc., a Connecticut non-stock corporation (the “Foundation”). The shares were purchased at a discount of 1.375% from the June 23, 2011 New York Stock Exchange closing price through a private transaction with the trustees of the Trust and the Board of Directors of the Foundation. We repurchased these shares with cash for $97.0 million. Without this discounted repurchase, the average price paid per share for the nine months ended September 30, 2011 would have been $39.14. The transaction was approved by the Nomination and Corporate Governance and Financial Policy Committees of our Board of Directors and we received independent financial and legal advice for this transaction. | |
| 2 | In any period, cash used in financing activities related to common stock repurchased may differ from the comparable change in equity, reflecting timing differences between the recognition of share repurchase transactions and their settlement for cash. As such, in the third quarter of 2011, 0.5 million shares were repurchased for $19.4 million, which settled in October 2011. |
| Three Months | Nine Months | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Net income
|
$ | 373.9 | $ | 389.7 | $ | 713.8 | $ | 690.9 | ||||||||
|
Other comprehensive income, net of tax:
|
||||||||||||||||
|
Foreign currency translation adjustment
|
(57.1 | ) | 24.1 | (23.3 | ) | 4.1 | ||||||||||
|
Pension and other postretirement benefit plans
|
4.6 | 2.1 | 19.1 | 10.8 | ||||||||||||
|
Unrealized loss on investment and forward exchange contracts
|
(0.1 | ) | (0.1 | ) | (6.2 | ) | (0.3 | ) | ||||||||
|
|
||||||||||||||||
|
Comprehensive income
|
321.3 | 415.8 | 703.4 | 705.5 | ||||||||||||
|
Less: comprehensive income attributable to NCI
|
(1.8 | ) | (10.0 | ) | (12.3 | ) | (19.2 | ) | ||||||||
|
|
||||||||||||||||
|
Comprehensive income attributable to the Company
|
$ | 319.5 | $ | 405.8 | $ | 691.1 | $ | 686.3 | ||||||||
|
|
||||||||||||||||
|
|||
| Three Months | Nine Months | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Amounts attributable to The McGraw-Hill Companies, Inc.
common shareholders:
|
||||||||||||||||
|
Income from continuing operations
|
$ | 366.7 | $ | 379.2 | $ | 698.3 | $ | 673.3 | ||||||||
|
Loss from discontinued operations, net of tax
|
(1.1 | ) | 0.7 | (1.7 | ) | 0.9 | ||||||||||
|
|
||||||||||||||||
|
Net income attributable to the Company
|
$ | 365.6 | $ | 379.9 | $ | 696.6 | $ | 674.2 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Basic weighted-average number of common shares outstanding
|
297.8 | 307.2 | 302.2 | 310.6 | ||||||||||||
|
Effect of stock options and other dilutive securities
|
5.8 | 2.1 | 5.2 | 2.3 | ||||||||||||
|
|
||||||||||||||||
|
Diluted weighted-average number of common shares outstanding
|
303.6 | 309.3 | 307.4 | 312.9 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Basic EPS:
|
||||||||||||||||
|
Income from continuing operations
|
$ | 1.23 | $ | 1.23 | $ | 2.31 | $ | 2.17 | ||||||||
|
Loss from discontinued operations, net of tax
|
— | 0.01 | $ | — | — | |||||||||||
|
|
||||||||||||||||
|
Net income
|
$ | 1.23 | $ | 1.24 | $ | 2.31 | $ | 2.17 | ||||||||
|
|
||||||||||||||||
|
Diluted EPS:
|
||||||||||||||||
|
Income from continuing operations
|
$ | 1.21 | $ | 1.23 | $ | 2.27 | $ | 2.15 | ||||||||
|
Loss from discontinued operations, net of tax
|
— | — | — | — | ||||||||||||
|
|
||||||||||||||||
|
Net income
|
$ | 1.21 | $ | 1.23 | $ | 2.27 | $ | 2.15 | ||||||||
|
|
||||||||||||||||
|
|||
| 2011 | 2010 | |||||||||||||||
| Operating | Operating | |||||||||||||||
| Three Months | Revenue | Income | Revenue | Income | ||||||||||||
|
S&P
|
$ | 409.9 | $ | 169.1 | $ | 417.5 | $ | 187.3 | ||||||||
|
MH Financial
|
348.5 | 112.6 | 294.3 | 85.8 | ||||||||||||
|
MHE
|
937.3 | 314.7 | 1,054.7 | 357.5 | ||||||||||||
|
I&M
|
228.5 | 51.3 | 204.1 | 43.8 | ||||||||||||
|
Intersegment elimination
|
(16.2 | ) 1 | — | (14.4 | ) 1 | — | ||||||||||
|
|
||||||||||||||||
|
Total operating segments
|
1,908.0 | 647.7 | 1,956.2 | 674.4 | ||||||||||||
|
|
||||||||||||||||
|
General corporate expense
|
— | (40.9 | ) | — | (44.4 | ) | ||||||||||
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Total
|
$ | 1,908.0 | $ | 606.8 | $ | 1,956.2 | $ | 630.0 | ||||||||
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| 2011 | 2010 | |||||||||||||||
| Operating | Operating | |||||||||||||||
| Nine Months | Revenue | Income | Revenue | Income | ||||||||||||
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S&P
|
$ | 1,333.1 | $ | 572.2 | $ | 1,223.8 | $ | 557.5 | ||||||||
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MH Financial
|
1,005.9 | 306.7 | 866.8 | 240.3 | ||||||||||||
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MHE
|
1,776.6 | 281.4 | 1,936.9 | 347.3 | ||||||||||||
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I&M
|
657.6 | 139.1 | 590.4 | 118.0 | ||||||||||||
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Intersegment elimination
|
(46.8 | )1 | — | (41.3 | )1 | — | ||||||||||
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Total operating segments
|
4,726.4 | 1,299.4 | 4,576.6 | 1,263.1 | ||||||||||||
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||||||||||||||||
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General corporate expense
|
— | (119.3 | ) | — | (117.7 | ) | ||||||||||
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Total
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$ | 4,726.4 | $ | 1,180.1 | $ | 4,576.6 | $ | 1,145.4 | ||||||||
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| 1 | Revenue for S&P and expenses for MH Financial include an intersegment royalty charged to MH Financial for the rights to use and distribute content and data developed by S&P. |
| See Note 2 — Acquisitions and Divestitures, and Note 11 — Restructuring for actions that impacted the segment operating results. |
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