The McGraw-Hill Companies (MHP)

Q2 2011 Earnings Call

July 28, 2011 8:30 am ET


Harold McGraw - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Jack Callahan - Chief Financial Officer and Executive Vice President

Donald Rubin - Senior Vice President of Investor Relations


Michael Meltz - JP Morgan Chase & Co

Sloan Bohlen - Goldman Sachs Group Inc.

Craig Huber -

Peter Appert - Piper Jaffray Companies



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Good morning, and welcome to The McGraw-Hill Companies' Second Quarter 2011 Earnings Call. I'd like to inform you that this call is being recorded for broadcast. [Operator Instructions] To access the webcast and slides, go to, and click on the link for the earnings announcement conference call. At the bottom of the webcast page are 3 links. If you are listening by telephone, please select the first link for slides only. For both slides and audio via webcast, select the Windows Media link. [Operator Instructions] I'd now like to introduce Mr. Donald Rubin, Senior Vice President of Investor Relations for the McGraw-Hill Companies. Sir, you may begin.

Donald Rubin

Thank you, and good day to our worldwide audience. We thank everyone for joining us this morning for The McGraw-Hill Companies' Second Quarter 2011 Earnings Call. I'm Donald Rubin, Senior Vice President, Investor Relations for The McGraw-Hill Companies. With me today are Harold McGraw III, Chairman, President and CEO; and Jack Callahan, Executive Vice President and Chief Financial Officer.

This morning, we issued a news release with our results. We trust you have all had a chance to review the release. If you need a copy of the release and financial schedules, they can be downloaded at Once again, that's

In today's earnings release and during the conference call, we are providing adjusted revenue and free cash flow information. This information is provided to enable investors to make meaningful comparisons of the company's operating performance between periods and to view the company's business from the same perspective as management's. The earnings release contains exhibits that reconcile the differences between the non-GAAP measures and the comparable financial measures calculated in accordance with U.S. GAAP.

Before we begin, I need to provide certain cautionary remarks about forward-looking statements. Except for historical information, the matters discussed in the teleconference may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates and descriptions of future events. Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. In this regard, we direct listeners to the cautionary statements contained in our Form 10-Ks, 10-Qs and other periodic reports filed with the U.S. Securities and Exchange Commission.

We're aware that we do have some media representatives with us on the call. However, this call is for investors, and we would ask that questions from the media be directed to Jason Feuchtwanger in our New York office at area code (212) 512-3151 subsequent to this call. Today's update will last approximately an hour. After the presentations, we will open the meeting to questions and answers.

It's now my pleasure to introduce the Chairman, President and CEO of The McGraw-Hill Companies, Terry McGraw.

Harold McGraw

Okay, thank you very much, Don. And good morning, everyone, and welcome to today's conference call. Besides Don, as Don mentioned, with me today is Jack Callahan, our Chief Financial Officer. He'll be providing a little bit more color to our financials in just a moment.

We have 2 objectives for today's call. First, we want to review our encouraging second quarter results and share our perspective on the positive outlook that we have for the second half of this year. Second, we want to update you on our important strategic portfolio review, which is intended to accelerate global growth and unlock shareholder value. And as always, after our presentations, we'll be pleased to address any of your comments, questions or we can go any direction you'd like.

I trust that you all had an opportunity to review our second quarter earnings release. If you recall, on our first quarter call in April, we said a promising year was off to a good start. Well, our second quarter results bear that out. Overall, our business is performing well. Earnings per share in the second quarter grew approximately 12% to $0.68 per share. Revenue grew more than 7% to $1.6 billion. We're very pleased with that.

Our revenue growth for the first half is the best since 2007. First half revenue increased by 7.4% to $2.9 billion. Earnings per share grew by 14.4% to $1.07. Based on our solid start this year and a promising outlook for the second half, we now expect to achieve the top end of our 2011 diluted earnings per share guidance of $2.79 to $2.89.

While we're encouraged by our first half results and prospects for the year, we are intent on growing faster in unlocking shareholder value by allocating our resources to support the best opportunities in growing global markets. That process is already well along. The most recent review of our businesses began with a decision to create McGraw-Hill Financial as a new segment for 2011.

We reorganized and refocused this business and put it under separate leadership to leverage our intellectual property for new value creation. By integrating previously separate but strong and successful business lines into one scaled operation, McGraw-Hill Financial is delivering a growing array of innovative solutions and high-value content across all asset classes to financial professionals around the world.

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