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McGraw-Hill Revenue Declines in First Quarter

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April 29 – May 7, 2009 Edition

McGraw-Hill Revenue
Declines in First Quarter

NEW YORK, NY/Authorlink News/04/28/09–The McGraw-Hill Companies today reported a 5.7% decline in revenues to $1.1 billion in the first quarter. Net income for the first quarter was $63.0 million versus $81.1 million for the first quarter of 2008.

“The challenging economy, a seasonally slow start in the elementary-high school business and continued weakness in advertising and the structured finance market were important factors in our first quarter decline,” said Harold McGraw III, chairman, president and chief executive officer of The McGraw-Hill Companies. . . In this economic environment, we continue to keep a tight grip on costs and expenses. Cost containment will be a priority for us all year.”

Revenues for the Education segment declined 5.3% to $312.6 million in the first quarter compared to the same period last year. The operating loss for the period was cut by 15.7% to $76.6 million. Foreign exchange rates reduced revenue by $13.3 million, but had a favorable impact of $4.8 million on operating loss for the segment.

Revenue for the McGraw-Hill School Education Group decreased by 11.6% in the first quarter to $122.6 million. Reflecting the unfavorable impact of foreign exchange, revenue for the McGraw-Hill Higher Education, Professional and International Group was off 0.7% to $190.0 million.

“In a seasonally slow period for the elementary-high school market, we experienced softness in residual products and supplemental materials. Typically, residual and supplementary products represent the majority of first quarter sales, but in 2009 there was also a year-over-year decline in our sales in North Carolina, the only adoption state that places substantial orders for new products in the first quarter. Last year, we benefited from a trong performance in North Carolina’s social studies adoption for grades 6-12. That success made comparisons more challenging in 2009 because North Carolina is spending less to buy materials on health for grades 6-12 and the McGraw-Hill School Education Group is not taking significant share in the state’s K-5 math adoption this year,” said Mr. McGraw.

For McGraw-Hill Higher Education, Professional and International Group, a solid first quarter performance in the U.S. college and university market was offset by the impact of foreign exchange on international business and reduced demand at retail in face of a weakening economy.

In the U.S. college and university market, the company is seeing higher enrollments and a market trend toward later second semester ordering, which shifts more sales from December into the first quarter. All major imprints showed gains in the first quarter. The leading best sellers were:

Sanderson, Computers in the Medical Office, 6th Edition Booth, Medical Assisting, 3rd Edition Lucas, The Art of Public Speaking, 10th Edition McConnell, Economics, 18th Edition Block, Foundations of Financial Management, 13th Edition.

In both higher education and professional markets, digital products and services produced double-digit increases in the first quarter. Homework management products, which include the new McGraw-Hill Connect series, continue to lead the company’s digital lineup in the U.S. college and university market. In professional markets, digital subscription products are growing internationally and showing strong renewals across the board.

“Major new digital subscription products introduced in recent months include Access Anesthesiology; JAMAevidence, which was developed with the Journal of the American Medical Association; Access Engineering and HarrisonMedicina, a new Spanish-language version of Harrison’s Online.

Revenues for the Financial Services segment declined 5.3% to $610.2 million in the first quarter compared to the same period last year. Operating profit decreased by 12.3% to $231.6 million. Foreign exchange rates reduced revenue by $23.8 million, but had a favorable impact of $3.7 million on operating profit.

Revenue for Standard & Poor’s Credit Market Services, which provides independent global credit ratings, credit risk evaluations and ratings-related information and products, declined by 8.4% to $391.4 million in the first quarter compared to the same period last year.

Revenue for Standard & Poor’s Investment Services, which provides comprehensive value-added financial data, information, investment indices and research, increased by 0.8% to $218.8 million.

In the Information & Media revenues also declined, by 7.4% to $225.4 million in the first quarter of 2009 compared to the same period last year. Operating profit decreased 76.4% to $2.8 million. Foreign exchange rates did not have a material effect on revenue but had a $3.6 million favorable impact on operating profit.

The Outlook: “Faced with continuing economic pressures in some of our key markets, we now expect revenue to decline 4.0% to 5.0% in 2009. In our previous guidance, we anticipated a decrease of 1.0% to 2.0%. But based on tight expense controls, we are maintaining our previous earnings per diluted share guidance of $2.20 to $2.30,” said McGraw.

Founded in 1888, The McGraw-Hill Companies is a leading global information services provider meeting worldwide needs in the financial services, education and business information markets through leading brands such as Standard & Poor’s, McGraw-Hill Education, BusinessWeek and J.D. Power and Associates. The Corporation has more than 280 offices in 40 countries. Sales in 2008 were $6.4 billion. Additional information is available at www.mcgraw-hill.com.