UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission File Number 1-1023
New York 13-1026995
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
On April 30, 1999 there were approximately 197.8 million shares of common stock (par value $1.00 per share) outstanding.
TABLE OF CONTENTS
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Page Number
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
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Consolidated Statement of Income for
the three months ended March 31, 1999 and 1998 3
Consolidated Balance Sheet at March 31, 1999,
December 31, 1998 and March 31, 1998 4-5
Consolidated Statement of Cash Flows for the three 6
months ended March 31, 1999 and 1998
Notes to Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Operating
------ Results and Financial Condition 11-15
Part II. OTHER INFORMATION
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Item 1. Legal Proceedings 16-18
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Item 6. Exhibits and Reports on Form 8-K 19-31
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Part I
Financial Information
The McGraw-Hill Companies, Inc.
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Consolidated Statement of Income
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Three Months Ended March 31, 1999 and 1998
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1999 1998
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(in thousands, except
per-share data)
Operating revenue $ 716,471 $ 703,420
Expenses:
Operating 351,081 358,575
Selling and general 267,590 253,035
Depreciation and amortization 52,867 51,606
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Total expenses 671,538 663,216
Other income - net 4,586 4,912
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Income from operations 49,519 45,116
Interest expense - net 9,441 12,102
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Income before taxes on income 40,078 33,014
Provision for taxes on income 15,630 12,875
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Net Income $ 24,448 $ 20,139
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Earnings per common share:
Basic $ 0.12 $ 0.10
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Diluted $ 0.12 $ 0.10
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Average number of common shares outstanding:
Basic 196,847 197,778
Diluted 199,330 199,582
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The McGraw-Hill Companies, Inc.
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Consolidated Balance Sheet
--------------------------
March 31, Dec. 31, March 31,
1999 1998 1998
---------- ----------- -----------
(In thousands)
ASSETS
Current assets:
Cash and equivalents $ 36,041 $ 10,451 $ 1,721
Accounts receivable (net of allowance
for doubtful accounts and sales
returns) (Note 4) 773,667 950,296 803,113
Receivable from broker-dealers and
dealer banks (Note 5) 7,286 4,597 9,115
Inventories (Note 4) 300,318 284,729 323,603
Prepaid income taxes 92,820 92,496 99,191
Prepaid and other current assets 107,293 86,192 92,502
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Total current assets 1,317,425 1,428,761 1,329,245
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Prepublication costs (net of accumulated
amortization) (Note 4) 365,919 358,429 333,390
Investments and other assets:
Investment in Rock-McGraw, Inc. - at
equity 81,115 79,394 73,624
Prepaid pension expense 110,758 107,997 102,609
Other 192,660 189,991 170,971
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Total investments and other assets 384,533 377,382 347,204
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Property and equipment - at cost 962,471 914,805 847,002
Less - accumulated depreciation 568,103 550,781 579,589
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Net property and equipment 394,368 364,024 267,413
Goodwill and other intangible assets - at
cost (net of accumulated amortization) 1,238,722 1,259,548 1,289,116
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$3,700,967 $3,788,144 $3,566,368
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The McGraw-Hill Companies, Inc.
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Consolidated Balance Sheet
--------------------------
March 31, Dec. 31, March 31,
1999 1998 1998
---------- ----------- -----------
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 189,113 $ 75,500 $ 75,458
Accounts payable 226,310 318,572 231,687
Payable to broker-dealers and dealer
banks (Note 5) 5,790 4,585 8,988
Accrued liabilities 204,555 312,916 172,571
Income taxes currently payable 62,917 67,396 108,272
Unearned revenue 247,825 236,167 240,227
Other current liabilities 278,859 276,315 241,093
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Total current liabilities 1,215,369 1,291,451 1,078,296
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Other liabilities:
Long-term debt (Note 6) 451,825 452,097 606,901
Deferred income taxes 123,224 129,303 107,669
Accrued postretirement healthcare and
other benefits 192,297 192,743 198,504
Other non-current liabilities 159,380 170,742 146,436
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Total other liabilities 926,726 944,885 1,059,510
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Total liabilities 2,142,095 2,236,336 2,137,806
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Shareholders' equity (Note 7):
Capital stock 205,852 205,852 102,933
Additional paid-in capital 19,998 - 42,888
Retained income 1,652,249 1,670,101 1,524,398
Accumulated other comprehensive income (78,975) (75,962) (75,934)
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1,799,124 1,799,991 1,594,285
Less - common stock in treasury-at cost 222,505 234,673 149,637
Unearned compensation on Restricted stock 17,747 13,510 16,086
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Total shareholders' equity 1,558,872 1,551,808 1,428,562
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$3,700,967 $3,788,144 $3,566,368
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The McGraw-Hill Companies, Inc.
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Consolidated Statement of Cash Flows
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For The Three Months Ended March 31, 1999 and 1998
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1999 1998
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(In thousands)
Cash flows from operating activities
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Net income $ 24,448 $20,139
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation 19,515 18,899
Amortization of goodwill and intangibles 13,227 13,473
Amortization of prepublication costs 20,125 19,234
Provision for losses on accounts receivable 10,033 21,509
Other (1,546) 647
Changes in assets and liabilities net of effect
of acquisitions and dispositions:
Decrease in accounts receivable 166,161 146,520
Increase in inventories (15,957) (33,612)
Increase in prepaid and other current assets (21,525) (4,451)
Decrease in accounts payable and accrued expenses (200,296) (159,308)
Increase in unearned revenue 11,857 20,548
Increase in other current liabilities 3,947 11,214
(Decrease)/increase in interest and income taxes
currently payable (4,235) 2,278
(Decrease)/increase in prepaid/deferred income taxes (176) 2,468
Net change in other assets and liabilities (545) (10,080)
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Cash provided by operating activities 25,033 69,478
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Investing activities
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Investment in prepublication costs (27,026) (26,292)
Purchases of property and equipment (51,507) (12,429)
Acquisition of businesses - (49)
Disposition of property, equipment and businesses 189 39
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Cash used for investing activities (78,344) (38,731)
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Financing activities
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Additions to/(repayments of) short-term
debt - net 114,122 (2,421)
Dividends paid to shareholders (42,300) (38,595)
Exercise of stock options 7,563 9,072
Other 62 (1,000)
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Cash provided by financing activities 79,447 (32,944)
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Effect of exchange rate fluctuations on cash (546) (850)
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Net change in cash and equivalents 25,590 (3,047)
Cash and equivalents at beginning of period 10,451 4,768
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Cash and equivalents at end of period $36,041 $ 1,721
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1. The financial information in this report has not been audited, but in the opinion of management all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly such information have been included. The operating results for the three months ended March 31, 1999 and 1998 are not necessarily indicative of results to be expected for the full year due to the seasonal nature of some of the company's businesses. The financial statements included herein should be read in conjunction with the financial statements and notes included in the company's Annual Report on Form 10-K for the year ended December 31, 1998.
On January 27, 1999, the Board of Directors declared a two-for-one stock split of the company's common stock which was distributed on March 8, 1999 to all shareholders of record on February 24, 1999. Accordingly, all references to common share data in the financial statements and notes have been restated to reflect the split.
Certain prior year amounts have been reclassified for comparability purposes.
2. The following table is a reconciliation of the company's net income to
comprehensive income for the three month period ended March 31, 1999:
1999 1998
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(in thousands, except
per-share data)
Net income $ 24,448 $ 20,139
Other comprehensive income, net of tax:
Foreign currency translation adjustments (3,013) (1,687)
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Total other comprehensive income (3,013) (1,687)
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Comprehensive income $ 21,435 $ 18,452
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3. The company has three reportable segments: Educational and Professional Publishing, Financial Services, and Information and Media Services. The educational and professional publishing segment provides education, training and lifetime learning textbooks and instructional materials for students and professionals. The financial services segment consists of Standard & Poor's operations, which provide financial information, ratings and analyses, enabling access to capital markets. The information and media services segment includes business and trade media offering information, insight and analysis.
Operating profit by segment is the primary basis for the chief operating decision maker of the company, the CEO Council, to evaluate the performance of each segment. A summary of operating results by segment for the three months ended March 31, 1999 and 1998 follows:
The McGraw-Hill Companies, Inc.
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Notes to Financial Statements
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1999 1998
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Operating Operating
Revenue Profit Revenue Profit
-------- --------- --------- ---------
(in thousands)
Educational and Professional
Publishing $208,983 $(43,857) $208,357 $(39,731)
Financial Services 308,444 94,322 281,504 83,039
Information and Media Services 199,044 15,415 213,559 17,509
-------------------------------- -------- -------- -------- --------
Total operating segments 716,471 65,880 703,420 60,817
General corporate expense - (16,361) - (15,701)
Interest expense - net - (9,441) - (12,102)
-------------------------------- -------- -------- -------- --------
Total company $716,471 $ 40,078* $703,420 $ 33,014*
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*Income before taxes on income.
4. The allowance for doubtful accounts and sales returns, the components of
inventory and the accumulated amortization of prepublication costs were as
follows:
March 31, Dec. 31, March 31,
1999 1998 1998
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(In thousands)
Allowance for doubtful accounts $ 107,377 $ 113,639 $ 97,550
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Allowance for sales returns $ 83,220 $ 98,784 $ 74,093
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Inventories:
Finished goods $ 241,897 $ 235,341 $ 257,154
Work-in-process 39,191 31,260 35,451
Paper and other materials 19,230 18,128 30,998
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Total inventories $ 300,318 $ 284,729 $ 323,603
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Accumulated amortization of
prepublication costs $ 512,610 $ 607,574 $ 474,392
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5. A subsidiary of J.J. Kenny Co. acts as an undisclosed agent in the purchase and sale of municipal securities for broker-dealers and dealer banks and the company had $277.3 million of matched purchase and sale commitments at March 31, 1999. Only those transactions not closed at the settlement date are reflected in the balance sheet as receivables and payables.
The McGraw-Hill Companies, Inc.
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Notes to Financial Statements
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6. A summary of long-term debt follows:
March 31, Dec. 31, March 31,
1999 1998 1998
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(In thousands)
9.43% Notes due 2000 $ 95,043 $ 95,043 $ 250,000
Commercial paper supported by
bank revolving credit agreement 350,000 350,000 350,000
Other 6,782 7,054 6,901
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Total long-term debt $ 451,825 $ 452,097 $ 606,901
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7. Common shares reserved for issuance
for conversions and stock based
awards were as follows:
March 31, Dec. 31, March 31,
1999 1998 1998
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$1.20 convertible preference stock
at the rate of 13.2 shares for each
share of preference stock 17,978 17,978 17,978
Stock based awards 17,081,129 18,015,440 19,606,162
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17,099,107 18,033,418 19,624,140
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8. Cash dividends per share declared during the three months ended March 31,
1999 and 1998 were as follows:
1999 1998
---- ----
Common stock $.215 $.195
Preference stock .300 .300
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9. A reconciliation of the number of shares used for calculating basic earnings
per common share and diluted earnings per common share for the three months
ended March 31, 1999 and 1998 follows:
1999 1998
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(In thousands)
Average number of common shares outstanding 196,847 197,778
Effect of stock options and other dilutive securities 2,483 1,804
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Average number of common shares outstanding including
effect of dilutive securities 199,330 199,582
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Restricted performance shares outstanding at March 31, 1999 of 748,000 were not included in the computation of diluted earnings per common shares because the necessary vesting conditions have not yet been made.
10.In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The new standard is effective January 1, 2000. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities, requiring companies to recognize all derivatives as either assets or liabilities on their balance sheet and measuring them at fair value. The adoption of SFAS No. 133 will not have a material impact on the company's financial statement disclosures.
Total expenses in 1999 increased only 1.3% to $671.5 million in the first quarter. The primary reason for this small increase was due to effective cost controls, the sale of the Information Technology and Communications Group in June 1998 and the decision to wind down CEC. Excluding the impact of the disposition and CEC's wind down, total expenses increased 6.6%.
Net interest expense decreased 22.0% to $9.4 million from $12.1 million in 1998. The primary reasons for the decrease are from lower long-term debt levels as a result of the company purchasing $155 million of its 9.43% Notes in the third quarter of 1998 and a lower effective interest rate on outstanding debt. Although average commercial paper borrowings increased $44.3 million from the prior year, the average interest rate on the borrowings decreased from 5.7% in 1998 to 5.1% in 1999.
The provision for taxes as a percent of income before taxes is 39%, the same as the first quarter in 1998.
Professional Book Group revenue increased due to the growing popularity of computer and Internet-related subjects as well as business, scientific and medical titles. The titles that contributed to its success were How to Get Started in Electronic Day Trading and The Official Guide to Quicken. International revenue grew modestly due to improved results in Canada and Mexico, offset somewhat by softness in Europe and in the Asia-Pacific region. Due to the continuing decline in enrollments at CEC, the company will not pursue new business but will continue to honor existing contracts with students as it commences with the unit's teach-out. The teach-out of existing contracts will not have a material effect on future operating profits. The segment's seasonal operating loss increased $4.1 million to $43.9 million, reflecting increased spending in preparing for the segment's selling period and the teach-out provisions at CEC.
Financial Services' revenue increased 9.6%, or $26.9 million, to $308.4 million and operating profits climbed 13.6% to $94.3 million. Standard & Poor's Ratings Services' revenue and operating profit increased despite a 1% decrease in new issue dollar volume in the U.S. bond market. The areas that contributed most to its revenue growth were corporate finance, structured finance, information services, European ratings and non-traditional products. Standard & Poor's Financial Information Services' revenue grew modestly due to strength in the retail brokerage market, led by S&P ComStock. Continued softness in the secondary municipal bond market resulted in flat revenue for J.J. Kenny. The company's index services continues to do well, recording higher licensing fees from institutional investors. S&P SPDR'S (S&P Depository Receipts) continue to grow in popularity. Assets in the large cap SPDR trust increased to $11.9 billion as the average trading volume of these instruments increased to 7.5 million shares in the first quarter. Total assets managed in these SPDR Trusts and in 15 fee-generating portfolios exceeded $20 billion at the end of the first quarter.
Information and Media Services' revenue declined $14.5 million, or 6.8%, during the quarter. Excluding the impact of the sale of the Information Technology & Communications Group last year, revenues increased slightly. Segment operating profit declined $2.1 million, or 12.0%, for the quarter. Revenues and operating profits at Business Week increased, despite one less issue being published this year versus last year. Advertising pages increased 11.4% during the quarter, according to Publishers Information Bureau. Construction Information Group revenue increased due to the strength of the electronic products offered, particularly at F.W. Dodge and Sweet's. Startup expenditures at F.W. Dodge for the rollout of its new product, Dodge Plans, decreased operating profit. Broadcasting's operating profit continues to improve, despite flat revenues, due to effective cost controls. Publication Services' revenue and operating profit declined due to weakness in the healthcare, energy and aviation industries. Tower Group International had a modest gain in revenues, but expenses for opening new offices and lower gross margins resulted in an operating loss.
Commercial paper borrowings at March 31, 1999 totaled $511.8 million, an increase of $139.9 million from December 31, 1998. Commercial paper borrowings have increased in part from the company's early extinguishment of $155 million of its 9.43% Notes in the third quarter of 1998. Commercial paper is supported by a $800 million revolving credit agreement with a group of banks terminating in February 2002, and $350 million has been classified as long term. There are no amounts outstanding under this agreement.
$95 million of 9.43% Notes, due in the year 2000, remain outstanding. Under a shelf registration that became effective with the Securities and Exchange Commission in 1990, the company can issue an additional $300 million of debt securities. The new debt could be used to replace a portion of the commercial paper borrowings with longer-term securities when management has determined that interest rates are attractive and markets are favorable.
Accounts receivable before reserves of $964.3 million decreased $198.5 million from the end of 1998 primarily from the impact of the seasonality of the educational publishing business. Inventories increased $15.6 million from the end of 1998 to $300.3 million as the company prepares itself for school publishing adoptions later this year.
Net prepublication costs increased $7.5 million from the end of 1998 to $365.9 million due to spending for school publishing programs, higher education and professional publishing titles. Prepublication cost spending in the first quarter totaled $27.0 million, an increase of $0.7 million over last year's first quarter spending. Spending is expected to increase over the remainder of the year. Purchases of property and equipment were $51.5 million, $39.1 million higher than the prior year. The majority of the increase can be attributed to the ongoing move by Standard & Poor's to its new location at 55 Water Street as part of the company's plan to consolidate office space in New York City. However, spending will decrease from the prior year as the consolidation of office space starts to wind down.
In January 1999, the Board of Directors declared a two-for-one stock split of the company's common stock that was distributed to shareholders on March 8, 1999. The Board of Directors also approved a 10.3% increase in the regular quarterly dividend on the company's common stock from $.195 to $.215 per common share. The Board of Directors also authorized a stock repurchase program of up to 15 million shares of outstanding shares. The repurchased shares will be used for general corporate purposes, including the issuance of shares for the exercise of employee stock options. Purchases under this program may be made from time to time on the open market and in private transactions dependent on market conditions. Only 5,000 shares have been repurchased under this program as of the filing date of this document.
The company uses software and data in various aspects of its business, including its products, product development, product support and many administrative functions such as billing and receiving information and merchandise from suppliers. As of December 31, 1998, the company had substantially completed an inventory of its technology environment, including non-information technology systems, with special emphasis placed on the company's key information processes. Plans have been developed to remediate or replace, and to test systems at each operating unit to achieve Year 2000 readiness, as appropriate.
The company has hired outside vendors to assist the operating units in implementing and/or remediating computer systems to be Year 2000 ready and to assist in testing. Each of the company's operating units has designated a leader responsible for overseeing and coordinating the day-to-day process to become Year 2000 ready.
As of March 31, 1999 we estimate that 96% of the company's applications have been remediated or replaced, with the remaining 4% to be completed in the 2nd quarter. Approximately 77% of the applications have been tested and are Year 2000 ready. The company has targeted July 1999 as the expected date that all computer systems and technology vital to each operating unit's profitability and functionality, including non-information technology, will have been tested and will be Year 2000 ready. Contingency plans have been developed for those systems that may not meet the July 1999 date. As of the filing date of this document, there have been no material setbacks in meeting the target dates and the company does not believe that there will be a major break in service due to the Year 2000 issue.
The company is communicating with third parties, including its key vendors, redistributors and customers, to determine their plans to address the Year 2000 issue. The company is taking the following steps to determine if key third parties are addressing the Year 2000 issue: (1) identifying and documenting all third parties related to the company's vital information systems or critical business processes; (2) sending letters asking them to detail the steps they are taking to become Year 2000 ready; and (3) based on the responses, meeting with selected vendors and establishing follow-up time schedules to evaluate progress on the issue.
Standard & Poor's (S&P) Financial Services' groups have been responding to the Securities Industry Association's (SIA) inquiries on the securities industry's readiness. As a part of this inquiry, the S&P Financial Services' groups have provided SIA with the appropriate documents, including an overview of Year 2000 projects, the techniques used to make their products Year 2000 ready, results of tests, methods of updating databases and critical third party product dependencies. These responses are being updated periodically.
Although the company expects a positive resolution to these issues, due to the unique and pervasive nature of the Year 2000 issue, it is difficult at this time to ascertain the financial impact to the company if the company experiences unanticipated problems related to the Year 2000 issue. The following describes the company's most reasonably likely worst case scenario, while recognizing the uncertainties inherent in a global problem that could potentially affect any business. Material systems failures resulting from the Year 2000 problem have the potential to adversely affect the company's operations and financial systems. Material failures could affect, by way of example, billing systems, collections, payroll, ordering, processing of financial records and access to facilities. The company's business segments could face additional operational problems in the event of a material systems or vendor failure, such as by way of example, an inability to fulfill book orders on a timely basis, a disruption in the company's ability to provide real time financial information or a disruption in our periodicals publishing schedule.
The company is also reviewing its business continuity plans that cover current worldwide operations and is preparing to devote appropriate internal and external resources in the event of an unforeseen or unanticipated Year 2000 readiness issue arising on or after January 1, 2000, including those related to third party dependencies, such as power outages, telecommunications failures or vendor failures. For example, as part of the planning process for the December 31, 1999 weekend, the company is making arrangements to: staff a Crisis Center at the company's Hightstown, NJ facilities with senior executives; station key facilities, security and information technology personnel at locations worldwide; and to have a major component of our information technology personnel at their work stations over that weekend and continuing as long thereafter as required.
The cost to assess, remediate and test systems that will not be replaced will approximate $19 million between 1998 and 2000; approximately $12.2 million has been spent through March 31, 1999, to remediate these systems. Certain systems that are not Year 2000 ready are being replaced as part of ongoing system development projects.
The company continues to address Euro related issues and its impact on information systems, currency exchange rate risk, taxation, contracts, competition and pricing. Action plans currently being implemented are expected to be in compliance with all laws and regulations; however, there can be no certainty that external factors will not have an adverse effect on the Company's operations. Any costs associated with the adoption of the Euro will be expensed as incurred and the company does not expect these costs to be material to its results of operations, financial condition or liquidity.
Actual results may differ materially from those in any forward-looking statements because any such statements involve risks and uncertainties and are subject to change based on various important factors, including but not limited to: worldwide economic and political conditions, the health of capital and equity markets, currency and foreign exchange volatility, continued state and local funding for educational matters, the successful marketing of new products, the effect of competitive products and pricing.
Part II
Other Information
United States Court of Appeals for the Ninth Circuit. Extensive discovery has been conducted. The trial date, previously scheduled to commence on March 2, 1999, was adjourned by the Court pending a decision by the California Supreme Court in the City of Atascadero v. Merrill Lynch litigation concerning the issue of aiding and abetting a breach of fiduciary duty. In May 1999, the Court granted the County's request to amend the Complaint to include a claim for aiding and abetting a breach of fiduciary duty. In response to Registrant's interrogatories, the County has claimed (inconsistently with damages claims made by the County in other litigation documents) compensatory damages of approximately $2.1 billion, subject to certain offsets. The Court's dismissal of the County's claims for Standard & Poor's 1993 ratings should significantly reduce the County's damages claims. The County has also claimed unspecified punitive damages. Registrant continues to believe that the allegations of the complaint and the damages claims lack merit and is vigorously contesting the action.
Item 6. Exhibits and Reports on Form 8-K Page Number
-------------------------------- -----------
(a) Exhibits
(3) By-laws (as amended to date) 19-29
(12) Computation of ratio of earnings to fixed charges 30
(27) Financial data schedule 31
(b) Reports on Form 8-K
No reports were filed during the period covered
by this report
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: By
-------------------- ------------------------------
Robert J. Bahash
Executive Vice President
and Chief Financial Officer
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Date: By
-------------------- ------------------------------
Kenneth M. Vittor
Executive Vice President
and General Counsel
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Exhibit (3)
THE McGRAW-HILL COMPANIES, INC.
1. A meeting of the stockholders shall be held annually, wheresoever designated by the Board of Directors on the last Wednesday in April of each year or on such other date as a resolution of the Board of Directors may designate, for the purpose of electing directors, hearing the reports of officers and directors, and for the transaction of such other business required or authorized to be transacted by the stockholders. Any previously scheduled annual or special meeting of stockholders may be postponed by resolution of the Board of Directors, upon public notice given prior to the date scheduled for such meeting.
2. Unless waived in writing by all stockholders, notice of the time, place and object of such meeting shall be given by mailing, at least ten days previous to such meeting, postage prepaid, a copy of such notice, addressed to each stockholder at his address as the same appears on the books of the Company.
3. Special meetings of stockholders for whatsoever purpose shall be held at the principal office of the Company or at such other place as may be designated by a resolution of the Board of Directors and may only be called pursuant to a resolution approved by a majority of the Board of Directors.
4. Notice of each special meeting, except where otherwise expressly provided by statute, and unless waived in writing by every stockholder entitled to vote, stating the time, place and in general terms the purpose or purposes thereof, shall be mailed not less than thirty nor more than fifty days prior to the meeting to each stockholder at his address as the same appears on the books of the Company.
5. At a meeting of stockholders the holders of a majority of the shares entitled to vote, being present in person or represented by proxy, shall be a quorum for all purposes, except where otherwise provided by statute or by the certificate of incorporation.
6. If at any meeting a quorum shall fail to attend in person or by proxy, a majority in interest of stockholders entitled to vote present or represented by proxy at such meeting may adjourn the meeting from time to time without further notice until a quorum shall attend and thereupon any business may be transacted which might have been transacted at the meeting as originally called had the same been then held. The Chairman of a meeting of stockholders may adjourn such meeting from time to time, whether or not there is a quorum of stockholders at such meeting.
7. The Chairman of the Board, and in his absence the President, and in his absence a Chairman appointed by the Board of Directors, shall call meetings of the stockholders to order and shall act as Chairman thereof.
8. The Secretary of the Company shall act as Secretary at all meetings of the stockholders and in his absence the Chairman of the meeting may appoint any person to act as Secretary.
9. At each meeting of stockholders every stockholder entitled to vote may vote in person or by proxy, and shall have one vote for each share of stock registered in his name. The Board of Directors may fix a day not more than fifty days prior to the day of holding any meeting of the stockholders as the day as of which stockholders entitled to notice of and to vote at such meeting shall be determined, and all persons who shall be holders of record of voting stock at such time and no other shall be entitled to notice of and to vote at such meeting.
10. At all elections of directors the polls shall be opened and closed, the proxies shall be received and taken in charge and all ballots shall be received and counted by two inspectors who shall be appointed by the Board. If any inspector shall fail to attend or refuse to act, the vacancy may be filled at the meeting by the Chairman of the meeting. No candidate for election as director shall be appointed an inspector.
11. The inspectors shall, before entering upon the discharge of their duties, be sworn to faithfully execute the duties of inspector at such meeting with strict impartiality and according to the best of their ability.
1. Nominations of persons for election to the Board of Directors of the Company and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Company's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Company who was a stockholder of record at the time of giving of notice provided for in this Article I-A, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Article I-A.
2. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 1 of this Article I-A, the stockholder must have given timely notice thereof in writing to the Secretary of the Company. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Company not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as provided above. Such stockholder's notice shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; (iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (a) the name and address of such stockholder, as they appear on the Company's books, and of such beneficial owner and (b) the class and number of shares of the Company which are owned beneficially and of record by such stockholder and such beneficial owner.
Notwithstanding anything in the second sentence of this Section 2 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Company is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Company at least 100 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Company not later than the close of business on the 10th day following the day on which such public announcement is first made by the Company.
3. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Company's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Company's notice of meeting (A) by or at the direction of the Board of Directors or (B) provided that the Board of Directors has determined that directors shall be elected at such special meeting, by any stockholder of the Company who is a stockholder of record at the time of giving of notice provided for in this Article I-A, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Article I-A. In the event the Company calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Company's notice of meeting, if the stockholder's notice required by Section 2 of this Article I-A shall be delivered to the Secretary at the principal executive offices of the Company not earlier than the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as provided above.
4. Only such persons who are nominated in accordance with the procedures set forth in this Article I-A shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Article I-A. The Chairman of the meeting of stockholders shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Article I-A and, if any proposed nomination or business is not in compliance with this Article I-A, to declare that such defective nominations or proposal shall be disregarded.
5. For purposes of this Article I-A, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
6. Notwithstanding the foregoing provisions of this Article I-A, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Article I-A. Nothing in this Article I-A shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Company's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
2. Without prejudice to the general powers conferred by the last preceding section, and the other powers conferred by the certificate of incorporation and by these By-Laws, it is hereby expressly declared that the Board of Directors shall have the following powers, that is to say:
FIRST:
From time to time to make and change rules and regulations, not inconsistent with these By-Laws, for the management of the Company's business and affairs.
SECOND:
To purchase or otherwise acquire for the Company any property, rights or privileges which the Company is authorized to acquire, at such price and on such terms and conditions, and for such consideration, as they shall, from time to time, see fit.
THIRD:
At their discretion to pay for any property or rights acquired by the Company, either wholly or partly, in money or in stocks, bonds, debentures or other securities of the Company.
FOURTH:
To appoint and at their discretion remove or suspend such subordinate officers, agents or servants, permanently or temporarily, as they may, from time to time, think fit, and to determine their duties, and fix, and, from time to time, change their salaries or emoluments, and to require security in such instance and in such amounts as they think fit.
FIFTH:
To confer by resolution upon any elected or appointed officer of the Company the power to choose, remove or suspend subordinate officers, agents or servants.
SIXTH:
To appoint any person or persons to accept and hold in trust for the Company any property belonging to the Company, or in which it is interested, or for any other purpose, and to execute and do all such duties and things as may be requisite in relation to any such trust.
SEVENTH:
To determine who shall be authorized on the Company's behalf, to sign bills, notes, receipts, acceptances, endorsements, checks, releases, contracts and documents.
EIGHTH:
From time to time to provide for the management of the affairs of the Company, at home or abroad, in such manner as they see fit, and in particular, from time to time, to delegate any of the powers of the Board of Directors in the course of the current business of the Company, to any special or standing committee or to any officer or agent, and to appoint any persons to be the agents of the Company, with such powers (including the power to sub-delegate), and upon such terms, as may be thought fit.
NINTH:
To appoint an Executive Committee of three or more directors and such other persons as may be added thereto by specific resolution of the Board, who may meet at stated times, or on notice to all by any of their own number; who shall generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time to time. The Board may delegate to such Committee authority to exercise the powers of the Board while the Board is not in session, except as otherwise provided by law. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board when required.
3. Each director shall serve for the term for which he shall be elected and until his successor shall be chosen and shall accept his election, but any director may resign at any time.
4. The directors may hold their meetings and may have an office and keep the books of the Company at such place or places as the Board from time to time may determine.
5. A regular meeting of the Board of Directors shall be held each year, either immediately following adjournment of the Annual Meeting of Stockholders or at such other time as may be fixed by the Chairman of the Board or the President but on a date no later than 60 days following the adjournment of the Annual Meeting of Stockholders, for the purpose of electing officers, a Chairman of the Board, members of the Executive Committee, members of the other committees of the Board, and to organize the Board for the ensuing year. Regular meetings of the Board of Directors shall also be held monthly at such time and place as may be fixed by the Chairman of the Board, or the President. Notice shall be given to each director of the date of each regular meeting by the Secretary in the same manner as provided in Article II, Section 7, of these By-Laws for notice of special meetings of directors.
6. Special meetings of the Board shall be held whenever called by the Chairman, or by the President, or by the Secretary upon receiving the written request of a majority of the directors of the Board then in office. If so specified in the notice thereof, any and all business may be transacted by a special meeting.
7. The Secretary shall give notice to each director of each special meeting by mailing the same, at least two days before the meeting, or by telegraphing or telephoning not later than the day before the meeting. If every director shall be present at any meeting any business may be transacted without previous notice.
8. The Chairman of the Board when present shall preside at all meetings of the Board of Directors and at all meetings of the stockholders. He shall perform all duties incident to the office of the Chairman of the Board.
9. A majority of the entire Board of Directors shall constitute a quorum for the transaction of business, except where otherwise provided by statute or by the certificate of incorporation or by these By-Laws, and a majority of those present at the time and place of any regular or special meeting may adjourn the same from time to time without notice.
10. Any one or more members of the Board may participate in a meeting of the Board by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.
1. The Board may appoint such committees, as it may deem advisable. Committees so appointed shall have such powers and duties as may be specified in the resolution of appointment.
2. Each committee shall keep regular minutes of its proceedings and report the same to the Board when required.
3. Any one or more members of any such committee may participate in a meeting of such committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.
4. Any action required or permitted to be taken at any meeting of any committee may be taken without a meeting, if all members of the committee consent in writing to the adoption of a resolution authorizing the action and if the resolution and the written consent thereto are filed with the proceedings of the committee.
1. The elective officers of the Corporation other than directors shall be a President and Chief Executive Officer, one or more Vice-Presidents, a Secretary and a Treasurer. Any two of the aforesaid offices may be filled by the same person, except the offices of President and Secretary. For purposes of these By-Laws the office of Vice-President also may include one or more Executive Vice-Presidents and one or more Senior Vice-Presidents. The term of office of each of said officers shall continue until the next annual election of directors and the selection of his successor by the Board of Directors. Any officer may, at any time, with or without cause, be suspended or removed from office by the affirmative vote of a majority of the entire Board at a meeting thereof. The President and Chief Executive Officer shall be chosen from among the directors.
2. The President and Chief Executive Officer of the Corporation shall be responsible for the general and active supervision and direction of the business, policies and activities of the Corporation, subject to the control of the Board of Directors. He may execute on behalf of the Corporation all authorized deeds, bonds, mortgages, contracts, documents and papers and may affix thereto the corporate seal when required. He shall have power to sign debentures and certificates of stock of the Corporation. He shall also have such duties as the Board may from time to time determine or as may be prescribed by these By-Laws. He shall be responsible for seeing that the orders and resolutions of the Board are carried into effect.
3. If the office of the Chairman of the Board shall be vacant, or if the person holding that office shall be absent, the President shall preside at meetings of stockholders and of the Board of Directors.
4. In the absence or inability to act of both the Chairman and the President, the Board may designate any director or senior corporate officer to perform the duties of temporary Chairman which shall include presiding at meetings of stockholders and of the Board of Directors.
5. The Board may elect or appoint one or more Vice-Presidents. Each Vice-President shall have such powers and shall perform such duties as may be assigned to him by the Board or by the President. In case of the absence or disability of the President the duties of that office shall be performed by whomever the Board shall determine by resolution.
6. The Secretary shall be sworn to the faithful discharge of his duties; he shall attend all meetings of the directors and stockholders, and shall record all the proceedings of such meetings in a book to be kept for that purpose, and shall perform like duties for standing committees when required. He shall have charge of the giving of notice of meetings of stockholders and directors, and perform all the duties assigned to him by the Board of Directors, or usual for the Secretary of a Corporation to perform. He, or the Treasurer shall, with the Chairman or President sign all debentures and stock certificates of the Company.
7. The Treasurer shall keep or cause to be kept full and true books of account and records of all receipts and disbursements, property, assets and liabilities of the Corporation, in books belonging to the Company, and shall deposit all moneys, securities, and valuables of the Corporation in the name of and to the credit of the Corporation, in such depositories as shall be designated by the Board of Directors. He shall disburse funds of the Company as ordered by the Board, taking proper vouchers therefor and shall render to the President and the Board of Directors, at regular meetings or whenever required, an account of all financial transactions of the Company. He shall also have power to sign debentures and certificates of stock of the Company, checks, notes, bills of exchange or other negotiable instruments for and in the name of the Company. He shall perform all other duties incident to the position of Treasurer, subject to the control of the Board.
8. The Board of Directors shall have power to appoint one or more Assistant Treasurers, Assistant Secretaries, Controller or Assistant Controllers who shall have such powers and perform such duties as may be designated by the Board.
9. The amount of salaries, wages, or other compensation to be paid to the officers, employees and agents of the Company shall be determined from time to time by the Board or by an Executive Officer or Committee to whom this work shall be delegated. No officer shall be incapacitated to receive a regular salary or fixed compensation by reason of being a director of the Corporation.
All funds and securities of the Company shall be deposited in such banks, trust companies or other depositories as are designated by the Board of Directors or by the aforesaid officers in the manner hereinabove provided, and for the purpose of such deposits, the President, any Vice-President, the Secretary, the Controller, the Treasurer or an Assistant Treasurer, and each of them, or any other person or persons authorized by the Board of Directors, may endorse, assign and deliver checks, notes, drafts, and other orders for the payment of money which are payable to the Company.
All checks, drafts, or orders for the payment of money, drawn in the name of the Company, may be signed by the President, any Vice-President, the Secretary, the Treasurer or any Assistant Treasurer, or by any other officer or any employee of the Company who shall from time to time be designated to sign checks, drafts, or orders on all accounts or on any specific account of the Company by an "instrument of designation" signed by any two of the following officers: the President, any Vice-President, and the Treasurer, and filed with the Secretary. The Secretary or any Assistant Secretary shall make certified copies of such instruments of designation and such certified copies shall be evidence to all concerned of the authority of the persons designated therein at the time of the certification. An instrument of designation may provide for (1) the facsimile signature of any person authorized to sign by such instrument or by this Section, or (2) the revocation of authority of any person (other than an officer named in this Section) to sign checks, drafts or orders drawn in the name of the Company.
For purposes of this section, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees, so that any person who is or was a director, officer or employee of such constituent corporation, or is or was serving at the request of such constituent corporation any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity at the request of the Corporation, shall stand in the same position under the provisions of this section with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
2. All certificates shall be consecutively numbered, and the names of the owners, the number of shares and the date of issue, shall be entered in the Company's books.
3. The Company or its duly authorized stock transfer agent shall keep a book to be known as the stock book, containing the names, alphabetically arranged, of all persons who are stockholders of the Corporation, showing their places of residence, the number of shares of preferred, preference and common stock held by each respectively, and the time when each became the owner thereof, also entries showing from and to whom such shares shall be transferred, and the number and denomination of all revenue stamps used to evidence the payment of the stock transfer tax as required by the laws of the State of New York, which books shall be open daily, during usual business hours, for inspection by any person who shall have been a stockholder of record in such Corporation for a least six months immediately preceding his demand; or by any person holding or thereunto in writing authorized by the holders of at least five per centum of any class of its outstanding shares, upon at least five days written demand. Persons so entitled to inspect stock books may make extracts therefrom.
4. Shares shall be transferred only on the books of the Corporation by the holder thereof in person or by his attorney upon the surrender and cancellation of certificates for a like number of shares, and upon tender of stock transfer stamps or the equivalent in money sufficient to satisfy all legal requirements.
5. The Board may make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates of stock of the Company.
6. Certificates for shares of stock or for debentures in the Corporation may be issued in lieu of certificates alleged to have been lost, stolen, destroyed, mutilated, or abandoned, upon the receipt of (1) such evidence of loss, theft, destruction or mutilation and a bond of indemnity in such amount, upon such terms and with such surety, if any, as the Board of Directors may require in each specific case, or (2) a request by an appropriate governmental agency or representative for the reissuance of a stock certificate claimed to be abandoned or escheated in accordance with the abandoned property or similar law of the state, or (3) in accordance with general resolutions.
2. Any stockholder, director or officer may waive any notice required to be given by these By-Laws.
Exhibit (12)
The McGraw-Hill Companies, Inc.
-------------------------------
Computation of Ratio of Earnings to Fixed Charges
-------------------------------------------------
Periods Ended March 31, 1999
----------------------------
Three Twelve
Months Months
--------- ---------
(In thousands)
Earnings
Earnings from continuing operations
Before income tax expense and
extraordinary item (Note) $ 40,078 $ 551,029
Fixed charges 19,483 79,721
-------- ---------
Total Earnings $ 59,561 $ 630,750
======== =========
Fixed Charges (Note)
Interest expense $ 9,441 $ 48,185
Portion of rental payments deemed to be
interest 10,042 31,536
-------- ---------
Total Fixed Charges $19,483 $ 79,721
======= =========
Ratio of Earnings to Fixed Charges 3.1x 7.9x
(Note) For purposes of computing the ratio of earnings to fixed charges,
"earnings from continuing operations before income taxes" excludes
undistributed equity in income of less than 50%-owned companies. "Fixed
charges" consist of (1) interest on debt, and (2) the portion of the
company's rental expense deemed representative of the interest factor in
rental expense.
Earnings from continuing operations before income taxes for the twelve
month period ended March 31, 1999 includes a $26.7 million gain on the
sale of a building at 65 Broadway and a $16.0 million charge for the
write-down of assets at the Continuing Education Center, recorded in
1998.
|
| ARTICLE 5 |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 3 MOS |
| FISCAL YEAR END | DEC 31 1999 |
| PERIOD END | MAR 31 1999 |
| CASH | 36,041 |
| SECURITIES | 0 |
| RECEIVABLES | 964,264 |
| ALLOWANCES | 190,597 |
| INVENTORY | 300,318 |
| CURRENT ASSETS | 1,317,425 |
| PP&E | 962,471 |
| DEPRECIATION | 568,103 |
| TOTAL ASSETS | 3,700,967 |
| CURRENT LIABILITIES | 1,215,369 |
| BONDS | 0 |
| PREFERRED MANDATORY | 14 |
| PREFERRED | 0 |
| COMMON | 205,838 |
| OTHER SE | 0 |
| TOTAL LIABILITY AND EQUITY | 3,700,967 |
| SALES | 716,471 |
| TOTAL REVENUES | 716,471 |
| CGS | 671,538 |
| TOTAL COSTS | 671,538 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 10,033 |
| INTEREST EXPENSE | 9,441 |
| INCOME PRETAX | 40,078 |
| INCOME TAX | 15,630 |
| INCOME CONTINUING | 24,448 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 24,448 |
| EPS PRIMARY | 0.12 1 |
| EPS DILUTED | 0.12 2 |