-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L2+wZNkWX6ARmWJp6lLxQYT+7LIQBxo9aNWxBdFf7mOve6sY3k46MUxUHXPzNNRe +4tyfzj/n5FmAzd35nAJbQ== 0000064040-95-000004.txt : 19951119 0000064040-95-000004.hdr.sgml : 19951119 ACCESSION NUMBER: 0000064040-95-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCGRAW-HILL COMPANIES INC CENTRAL INDEX KEY: 0000064040 STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731] IRS NUMBER: 131026995 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01023 FILM NUMBER: 95591480 BUSINESS ADDRESS: STREET 1: 1221 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2125122000 FORMER COMPANY: FORMER CONFORMED NAME: MCGRAW HILL INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: HILL PUBLISHING CO DATE OF NAME CHANGE: 19670327 FORMER COMPANY: FORMER CONFORMED NAME: MCGRAW PUBLISHING CO DATE OF NAME CHANGE: 19670327 10-Q 1 SEPTEMBER 1995 10Q ELECTRONIC FILE 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 September 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- -------- Commission File Number 1-1023 THE McGRAW-HILL COMPANIES, INC. - --------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 13-1026995 - ---------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1221 Avenue of the Americas, New York, N.Y. 10020 - --------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 512-2000 ------------------ Not Applicable - --------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 October 27, 1995 there were 50,025,062 shares of Common Stock (par value $1.00 per share) outstanding. The McGraw-Hill Companies, Inc. ------------------------------- TABLE OF CONTENTS ----------------- Page Number ----------- PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements ------- Consolidated Statement of Income for the three and nine month periods ended September 30, 1995 and 1994 3 Consolidated Balance Sheet at September 30, 1995, December 31, 1994 and September 30, 1994 4-5 Consolidated Statement of Cash Flows for the nine months ended September 30, 1995 and 1994 6 Notes to Consolidated Financial Statements 7-10 Item 2. Management's Discussion and Analysis of Operating ------- Results and Financial Condition 11-14 PART II. OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K 15-17 ------- -2- PART I Financial Information Item 1. Financial Statements -------------------- The McGraw-Hill Companies, Inc. ------------------------------- Consolidated Statement of Income -------------------------------- Periods Ended September 30, 1995 and 1994 -----------------------------------------
Three Months Nine Months -------------------- ---------------------- 1995 1994 1995 1994 --------- --------- ---------- ---------- (In thousands, except per-share data) Operating revenue $ 904,351 $ 855,517 $2,185,681 $2,063,570 Expenses: Operating 365,512 366,513 971,151 933,356 Selling and general 264,600 242,472 709,663 667,848 Depreciation and amortization 81,422 84,972 180,145 178,238 --------- --------- ---------- ---------- Total expenses 711,534 693,957 1,860,959 1,779,442 Other income - net 3,473 6,002 14,238 14,636 --------- --------- ---------- ---------- Income from operations 196,290 167,562 338,960 298,764 Interest expense - net 16,320 14,224 45,399 38,270 --------- --------- ---------- ---------- Income before taxes on income 179,970 153,338 293,561 260,494 Provision for taxes on income 74,148 63,176 120,947 107,324 --------- --------- ---------- ---------- Net income $ 105,822 $ 90,162 $ 172,614 $ 153,170 ========= ========= ========== ========== Earnings per common share $ 2.12 $ 1.82 $ 3.46 $ 3.09 ========= ========= ========== ========== Average number of common shares outstanding 49,980 49,537 49,852 49,487
-3- The McGraw-Hill Companies, Inc. ------------------------------- Consolidated Balance Sheet --------------------------
Sept. 30, Dec. 31, Sept. 30, 1995 1994 1994 ---------- ---------- ---------- (In thousands) ASSETS Current assets: Cash and equivalents $ 4,921 $ 8,056 $ 26,978 Accounts receivable (net of allowance for doubtful accounts) (Note 3) 930,961 757,949 845,754 Receivable from broker-dealers and dealer banks (Note 4) 11,025 23,047 73,307 Inventories (Note 3) 261,410 213,253 232,842 Prepaid income taxes 69,881 70,556 92,743 Prepaid and other current assets 45,147 51,226 38,987 ---------- ---------- ---------- Total current assets 1,323,345 1,124,087 1,310,611 ---------- ---------- ---------- Prepublication costs (net of accumulated amortization) (Note 3) 255,571 270,506 271,591 Investments and other assets: Investment in Rock-McGraw, Inc. - at equity 60,985 57,652 56,263 Prepaid pension expense 105,192 95,110 95,945 Other 146,258 142,502 149,148 ---------- ---------- ---------- Total investments and other assets 312,435 295,264 301,356 ---------- ---------- ---------- Property and equipment - at cost 818,797 788,671 780,795 Less - accumulated depreciation 489,693 442,889 432,631 ---------- ---------- ---------- Net property and equipment 329,104 345,782 348,164 Goodwill and other intangible assets - at cost (net of accumulated amortization) 963,655 972,894 982,330 ---------- ---------- ---------- $3,184,110 $3,008,533 $3,214,052 ========== ========== ==========
-4- The McGraw-Hill Companies, Inc. ------------------------------- Consolidated Balance Sheet --------------------------
Sept. 30, Dec. 31, Sept. 30, 1995 1994 1994 ---------- ---------- ---------- (In thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ 137,458 $ 105,288 $ 131,580 Accounts payable 171,114 176,314 164,400 Payable to broker-dealers and dealer banks (Note 4) 11,044 21,909 72,937 Accrued liabilities 180,685 177,172 170,361 Income taxes currently payable 129,046 54,300 115,170 Unearned revenue 216,471 239,715 223,132 Other current liabilities 238,266 233,287 254,422 ---------- ---------- ---------- Total current liabilities 1,084,084 1,007,985 1,132,002 ---------- ---------- ---------- Other liabilities: Long-term debt (Note 5) 657,328 657,517 758,083 Deferred income taxes 125,184 129,750 113,081 Accrued postretirement healthcare and other benefits 191,156 191,650 192,854 Other non-current liabilities 114,523 108,579 109,651 ---------- ---------- ---------- Total other liabilities 1,088,191 1,087,496 1,173,669 ---------- ---------- ---------- Total liabilities 2,172,275 2,095,481 2,305,671 ---------- ---------- ---------- Shareholders' equity (Note 6): Capital stock 51,474 51,474 51,474 Additional paid-in capital 76,895 69,314 68,747 Retained income 1,005,946 923,052 901,529 Foreign currency translation adjustments (49,359) (45,224) (25,841) ---------- ---------- ---------- 1,084,956 998,616 995,909 Less - common stock in treasury-at cost 63,587 76,987 78,043 unearned compensation on restricted stock 9,534 8,577 9,485 ---------- ---------- ---------- Total shareholders' equity 1,011,835 913,052 908,381 ---------- ---------- ---------- $3,184,110 $3,008,533 $3,214,052 ========== ========== ==========
-5- The McGraw-Hill Companies, Inc. ------------------------------- Consolidated Statement of Cash Flows ------------------------------------ For The Nine Months Ended September 30, 1995 And 1994 -----------------------------------------------------
1995 1994 --------- --------- (In thousands) Cash flows from operating activities - ------------------------------------ Net income $ 172,614 $ 153,170 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 49,485 47,312 Amortization of goodwill and intangibles 28,434 28,193 Amortization of prepublication costs 102,226 102,733 Provision for losses on accounts receivable 49,427 49,923 Other 582 (1,790) Changes in assets and liabilities net of effect of acquisitions and dispositions: Increase in accounts receivable (204,628) (184,173) Increase in inventories (50,108) (16,876) Decrease in accounts payable and accrued expenses (6,833) (26,767) Increase in interest and income taxes payable 69,547 72,590 Net change in other assets and liabilities (24,369) 5,352 - --------------------------------------------------- --------- --------- Cash provided by operating activities 186,377 229,667 - --------------------------------------------------- --------- --------- Investing activities - -------------------- Purchases of property and equipment (32,045) (54,751) Investment in prepublication costs (89,150) (88,517) Disposition of property and equipment 474 4,680 Acquisition of businesses (26,165) (717) Other 1,129 2,655 - --------------------------------------------------- --------- --------- Cash used for investing activities (145,757) (136,650) - --------------------------------------------------- --------- --------- Financing activities - -------------------- Dividends paid to shareholders (89,720) (85,891) Additions to/(repayment of) short-term debt - net 32,478 (39,523) Exercise of Stock Options 15,828 11,401 Other (2,341) 21 - --------------------------------------------------- --------- --------- Cash used for financing activities (43,755) (113,992) - --------------------------------------------------- --------- --------- Net change in cash and equivalents (3,135) (20,975) Cash and equivalents at beginning of period 8,056 47,953 - --------------------------------------------------- --------- --------- Cash and equivalents at end of period $ 4,921 $ 26,978 ========= =========
-6- The McGraw-Hill Companies, Inc. ------------------------------- Notes to Financial Statements ----------------------------- 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 and nine month periods ended September 30, 1995 and 1994 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, 1994. Certain prior year amounts have been reclassified for comparability purposes. 2. Operating profit by segment is total operating revenue less expenses which are deemed to be related to the unit's operating revenue. A summary of operating results by segment for the three months and nine months ended September 30, 1995 and 1994 follows:
1995 1994 -------------------- --------------------- Operating Operating Revenue Profit Revenue Profit --------- --------- --------- --------- Three Months (In thousands) ------------ Educational and Professional Publishing $496,709 $134,256 $483,212 $116,695 Financial Services 193,953 57,359 179,552 49,410 Information and Media Services 213,689 21,878 192,753 16,438 -------------------------------- -------- -------- -------- -------- Total operating segments 904,351 213,493 855,517 182,543 General corporate expense - (17,203) - (14,981) Interest expense - net - (16,320) - (14,224) -------------------------------- -------- -------- -------- -------- Total company $904,351 $179,970* $855,517 $153,338* ======== ======== ======== ======== *Income before taxes on income.
-7- The McGraw-Hill Companies, Inc. ------------------------------- Notes to Financial Statements -----------------------------
1995 1994 -------------------- --------------------- Operating Operating Revenue Profit Revenue Profit ---------- --------- ---------- --------- Nine Months (In thousands) ----------- Educational and Professional Publishing $ 969,615 $136,105 $ 918,345 $112,668 Financial Services 585,394 172,635 557,092 161,449 Information and Media Services 630,672 73,818 588,133 64,198 ------------------------------ ---------- -------- ---------- -------- Total operating segments 2,185,681 382,558 2,063,570 338,315 General corporate expense - (43,598) - (39,551) Interest expense - net - (45,399) - (38,270) ------------------------------ ---------- -------- ---------- -------- Total company $2,185,681 $293,561* $2,063,570 $260,494* ========== ======== ========== ======== *Income before taxes on income.
-8- The McGraw-Hill Companies, Inc. ------------------------------- Notes to Financial Statements ----------------------------- 3. The allowance for doubtful accounts, the components of inventory and the accumulated amortization of prepublication costs were as follows:
Sept. 30, Dec. 31, Sept. 30, 1995 1994 1994 --------- --------- --------- (In thousands) Allowance for doubtful accounts $ 80,976 $ 78,732 $ 79,069 ========= ========= ========= Inventories: Finished goods $ 162,021 $ 140,168 $ 149,559 Work-in-process 61,413 47,795 61,441 Paper and other materials 37,976 25,290 21,842 --------- --------- --------- Total inventories $ 261,410 $ 213,253 $ 232,842 ========= ========= ========= Accumulated amortization of prepublication costs $ 409,095 $ 346,172 $ 335,164 ========= ========= =========
4. 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 $247 million of matched purchase and sale commitments at September 30, 1995. Only those transactions not closed at the settlement date are reflected in the balance sheet as receivables and payables. 5. A summary of long-term debt follows:
Sept. 30, Dec. 31, Sept. 30, 1995 1994 1994 --------- --------- --------- (In thousands) 9.43% senior notes due 2000 $ 250,000 $ 250,000 $ 250,000 Commercial paper supported by bank revolving credit agreement 400,000 400,000 500,000 Other 7,328 7,517 8,083 --------- --------- --------- Total long-term debt $ 657,328 $ 657,517 $ 758,083 ========= ========= =========
-9- The McGraw-Hill Companies, Inc. ------------------------------- Notes to Financial Statements ----------------------------- 6. Common shares reserved for issuance, for conversions and for stock based awards were as follows:
Sept. 30, Dec. 31, Sept. 30, 1995 1994 1994 --------- --------- --------- $1.20 convertible preference stock at the rate of 3.3 shares for each share of preference stock 4,673 4,996 4,996 Stock based awards 3,696,712 4,055,114 4,120,590 --------- --------- --------- 3,701,385 4,060,110 4,125,586 ========= ========= ========= Common shares reserved for issuance at September 30, 1994 and December 31, 1994 were restated to include 2.3 million shares under the 1993 Key Employee Stock Incentive Plan. No stock options under the 1993 Plan were issued prior to 1995.
7. Cash dividends per share declared during the periods were as follows:
Three Months Nine Months ------------- ------------- 1995 1994 1995 1994 ---- ---- ----- ----- Common stock $.60 $.58 $1.80 $1.74 Preference stock .30 .30 .90 .90
-10- Item 2. Management's Discussion and Analysis of Operating ------------------------------------------------- Results and Financial Condition ------------------------------- Operating Results - Comparing Periods Ended September 30, 1995 and 1994 - ----------------------------------------------------------------------- Three Months - ------------ Consolidated Review - ------------------- Operating revenue for the quarter grew $48.8 million, or 5.7%, to $904.4 million reflecting increases in all three operating segments. In the Educational and Professional Publishing segment, increases in school publishing and legal were partially offset by declines in the depressed Mexican market. The Financial Services' segment reflected increased revenues at both Standard & Poor's Ratings and the Financial Information Services Group. Strong advertising page growth in Business Week accounted for the majority of the increase in Information and Media Services. Operating profits improved in all three operating segments. Net income increased 17.4% to $105.8 million. Earnings per share were $2.12 versus $1.82 last year. Total expenses in the quarter increased $17.6 million, or 2.5%, reflecting increased selling expenses associated with higher revenues, particularly in school publishing due to higher adoption activity. Operating expenses were flat with last year reflecting cost controls offsetting increased paper costs. Additionally, last year's total expenses included the write-down for discontinuing a legal information service in Canada. Net interest expense increased $2.1 million, or 14.7%, reflecting an increase in average commercial paper rates from 4.6% in 1994 to 6.0% in 1995. The impact of higher rates was partially offset by reduced average commercial paper borrowing levels from the prior year. The provision for taxes as a percent of income before taxes was 41.2% in both 1995 and 1994. Segment Review - -------------- Educational and Professional Publishing revenue increased $13.5 million, or 2.8%, over the 1994 quarter to $496.7 million. Revenue growth in the quarter was negatively impacted by difficult market conditions in Mexico resulting from last year's peso devaluation, the timing of ordering in the school market and softness in the testing market. In educational publishing, there was a strong performance by Glencoe, the secondary and vocational publisher, while elementary publishing was impacted by early ordering in the second quarter. College improved, with strong front and backlist sales. Testing revenues were below last year reflecting ordering delays in the marketplace. Legal publishing had an excellent quarter as Shepard's marketed a 21-volume Federal Citator series. Internationally, difficult market conditions in Mexico were partially offset by growth in other regions. Operating profit for the segment improved $17.6 million, or 15.0%, due to the strong performances at Glencoe and Shepard's, -11- improvement at College, and cost controls, partially due to savings from the integration of publishing operations. 1995's improvement also reflects the impact of a $3.7 million provision for the write-off of the CanCite legal information product in Canada last year. Financial Services' segment revenue improved $14.4 million, or 8.0%, and operating profit improved $7.9 million, or 16.1%, reflecting improvement in both core businesses: S&P Ratings and Financial Information Services. S&P Rating's revenues and profits improved over the prior year reflecting increased new issue volume in the U.S. corporate bond market, particularly in corporate and asset- backed securities, continued growth overseas and benefits from new ratings' services. The insurance ratings group produced excellent worldwide results. Financial Information Services' revenues and profits also gained in the quarter, led by Platt's, MMS International, Compustat and the Equity Investor Services Group. J.J. Kenny results were off from last year due to softness in the public markets. Information and Media Services revenue increased $20.9 million, or 10.9%, while operating profits surged to $21.9 million, an increase of $5.4 million, or 33.1%. Business Week had an excellent quarter, with a 17.4% increase in advertising pages in the North American edition and excellent page growth internationally. The science & technology and healthcare publications improved, while results from the computer magazines were mixed. The Construction Information Group also contributed to the quarterly growth, primarily in electronic information services, reflecting improvement in non-residential construction activity. Broadcasting revenues and profits declined from the prior year due to the lack of political advertising in 1995 and soft local advertising, primarily in San Diego. The Denver station completed its network affiliation change to ABC from CBS in September. The Bakersfield station will also switch affiliation to ABC sometime in 1996. Nine Months - ----------- Consolidated Review - ------------------- For the first nine months of the year, operating revenue of $2.2 billion was $122 million, or 5.9%, ahead of 1994. School publishing was a major contributor to the revenue growth, reflecting strong 1995 adoption activity, primarily in the seasonal June-September timeframe. Business Week, Financial Information Services and S&P Ratings also contributed significantly to the increase in revenues. Total expenses increased $81.5 million, or 4.6%, reflecting primarily volume-related costs and continuing investments in S&P Ratings. Net income increased 12.7% to $172.6 million. Earnings per share were $3.46 versus $3.09 last year. Net interest expense increased $7.1 million, or 18.6%, reflecting an increase in average commercial paper interest rates from 4.7% in 1994 to 5.9% in 1995. The impact of higher rates was partially offset by reduced average commercial paper borrowing levels from the prior year. The provision for taxes as a percent of income before taxes was 41.2% in both 1995 and 1994. -12- Segment Review - -------------- Educational and Professional Publishing revenue increased $51.3 million, or 5.6%, to $969.6 million. School publishing accounts for most of the revenue rise, with increases also in legal publishing and domestic professional publishing. Internationally, revenues declined in Mexico due to depressed market conditions, which was partially offset by growth in Europe and Asia. Operating profit for the segment improved to $136.1 million, an improvement of $23.4 million, or 20.8%, primarily reflecting the improved revenues and cost controls, offsetting some inflationary cost increases and higher paper prices. 1995's improvement also reflects 1994's CanCite provision. Financial Services' revenue increased $28.3 million, or 5.1%, to $585.4 million. Operating profit improved $11.2 million, or 6.9%. S&P Ratings' revenues improved due to growth in new ratings services and continued global expansion. Growth in new issuance volume in the third quarter also contributed to the increase in revenues. S&P Ratings' profits were flat with last year due to continuing investments to expand the business and the declines in new issuance volume in the U.S. corporate bond market in the first half of the year. Financial Information Services' revenues and operating profits improved reflecting continued growth in financial information products and services, particularly in Financial Data Services, comprised of S&P ComStock, Platt's and MMS International. Profits were also enhanced by the continued turnaround at DRI/McGraw-Hill. Information and Media Services' revenue increased $42.5 million, or 7.2%, to $630.7 million while operating profit improved $9.6 million, or 15.0%. The revenue increase is primarily attributable to Business Week, due to increased advertising pages, and Tower Group International, mainly due to the acquisition of UCB Canada, Ltd. Business Week accounted for most of the segment operating profit improvement. Profits declined at Tower due to higher costs. Results for the computer publications group were down. Broadcasting revenues improved slightly while profits were flat with last year. Revenues and profits in the Construction Information Group improved over the prior year. Financial Condition - September 30, 1995 versus December 31, 1994 - ----------------------------------------------------------------- The company continues to maintain a strong financial position. Cash provided by operating activities totaled $186.4 million compared to $229.7 million last year. This decline in the cash flow from operations reflects seasonal factors related to 1995 school publishing adoptions, such as inventory purchases, sampling costs and larger receivables at September 30 from increased adoption- related sales. Total debt was $794.8 million, an increase of $32.0 million from year-end. The increase in debt reflects the seasonal factors noted above, as well as the acquisition of UCB Canada, Ltd. The increased seasonality of the company's businesses caused by the 1993 acquisition of the Macmillan/McGraw-Hill School Publishing Company has impacted the company's borrowing patterns during the year. The company now borrows during the first half of the fiscal year and generates cash in the second half of the year, primarily from fourth quarter collections from customers in the education markets. This pattern is magnified in years where there is -13- significant state adoption activity, such as in 1995. Some early ordering in the school market in the second quarter accelerated cash collections into the third quarter in 1995. Cash expenditures related to the consolidation of book publishing operations, primarily for severance costs and lease terminations, had a minimal impact on the company's liquidity. Commercial paper borrowings at September 30, 1995 totaled $529.5 million, an increase of $31 million from December 31, 1994. Commercial paper debt is supported by an $800 million revolving credit agreement with a group of banks terminating in November 1999, and $400 million has been classified as long-term. There are no amounts outstanding under this agreement. Under a shelf registration which became effective with the Securities and Exchange Commission in mid-1990, the company can issue an additional $250 million of debt securities. The new debt could be used to replace a portion of the commercial paper borrowings with longer term securities, when and if interest rates are attractive and markets are favorable. Accounts receivable, before reserves, of $1.0 billion increased $175.3 million from the end of 1994, due primarily to third quarter school publishing sales. Receivables were $87.1 million higher than at September 30, 1994, due primarily to the acquisition of UCB Canada, Ltd. and revenue growth in the company's businesses. Number of days sales outstanding, a key indicator of collection efficiency, improved one day from September 1994. Inventories increased $48.2 million to $261.4 million from the end of 1994 due primarily to the seasonal requirements for school publishing and the seasonal buildup for the annual Sweet's Files. Inventories were $28.6 million higher than at September 30, 1994 due to the 1995 school publishing adoptions. Net prepublication costs at September 30 decreased $14.9 million from the end of 1994 to $255.6 million due to amortization exceeding additional year-to-date investment in new titles and school programs. 1995 year-to-date prepublication cost investment totaled $89.2 million, an increase of $0.6 million compared to the comparable nine month period in 1994. Net prepublication costs were $16.0 million lower than at September 30, 1994 as amortization has exceeded spending in the twelve months ended September 30, 1995. Purchase of property and equipment during the first nine months totaled $32.0 million, primarily for computer equipment for the market focus groups. This spending level was $22.7 million lower than the comparable 1994 period primarily due to the 1994 purchase of a building which houses some of the company's Financial Information Services' units in New York and the 1994 move of the company's school publishing operations in New York. -14- PART II Other Information Item 6. Exhibits and Reports on Form 8-K -------------------------------- a) Exhibits -------- (12) Computation of ratio of earnings to fixed charges. (27) Financial Data Schedule. SIGNATURES ---------- 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 hereunto duly authorized. THE McGRAW-HILL COMPANIES, INC. -------------------------------- Date: 11/10/95 By Robert J. Bahash ------------------ ------------------------------ Robert J. Bahash Executive Vice President and Chief Financial Officer Date: 11/10/95 By Thomas J. Kilkenny ------------------ ------------------------------ Thomas J. Kilkenny Vice President and Controller Date: 11/13/95 By Kenneth M. Vittor ------------------ ------------------------------ Kenneth M. Vittor Senior Vice President and General Counsel -15- Exhibit (12) The McGraw-Hill Companies, Inc. ------------------------------- Computation of Ratio of Earnings to Fixed Charges ------------------------------------------------- Periods Ended September 30, 1995 --------------------------------
Nine Twelve Months Months --------- --------- (In thousands) Earnings Earnings from continuing operations before income tax expense (Note)...... $ 290,228 $ 375,147 Fixed charges........................... 71,657 92,532 Capitalized interest.................... (233) (320) --------- --------- Total Earnings....................... $ 361,652 $ 467,359 ========= ========= Fixed Charges (Note) Interest expense........................ $ 49,318 $ 64,021 Portion of rental payments deemed to be interest.............................. 22,339 28,511 --------- --------- Total Fixed Charges.................. $ 71,657 $ 92,532 ========= ========= Ratio of Earnings to Fixed Charges 5.0x 5.1x (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 capital leases, and (2) the portion of the company's rental expense deemed representative of the interest factor in rental expense.
-16- EX-27 2 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 1,000 9-MOS DEC-31-1995 SEP-30-1995 4,921 0 1,011,937 80,976 261,410 1,323,345 818,797 489,693 3,184,110 1,084,084 0 51,460 14 0 0 3,184,110 2,185,681 2,185,681 1,860,959 1,860,959 0 49,427 45,399 293,561 120,947 172,614 0 0 0 172,614 3.46 3.46
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