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, 1997
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 April 30, 1997 there were approximately 100.0 million shares of
common stock (par value $1.00 per share) outstanding.
<PAGE>
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 months ended March 31, 1997 and 1996 3
Consolidated Balance Sheet at March 31, 1997,
December 31, 1996 and March 31, 1996 4-5
Consolidated Statement of Cash Flows for the three
months ended March 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Operating
------- Results and Financial Condition 10-12
PART II. OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 13
-------
Item 6. Exhibits and Reports on Form 8-K 13-16
-------
-2-
<PAGE>
PART I
Financial Information
Item 1. Financial Statements
--------------------
<TABLE>
The McGraw-Hill Companies, Inc.
-------------------------------
Consolidated Statement of Income
--------------------------------
Three Months Ended March 31, 1997 and 1996
------------------------------------------
<CAPTION>
1997 1996
---------- ----------
(In thousands, except
per-share data)
<S> <C> <C>
Operating revenue $ 652,935 $ 583,851
Expenses:
Operating 325,596 293,189
Selling and general 246,445 216,600
Depreciation and amortization 48,159 40,626
---------- ----------
Total expenses 620,200 550,415
Other income - net 3,626 5,242
---------- ----------
Income from operations 36,361 38,678
Interest expense - net 11,384 11,419
---------- ----------
Income before taxes on income 24,977 27,259
Provision for taxes on income 9,991 11,067
---------- ----------
Net income $ 14,986 $ 16,192
========== ==========
Earnings per common share $ 0.15 $ 0.16
========== ==========
Average number of common
shares outstanding 100,037 100,706
</TABLE>
-3-
<PAGE>
<TABLE>
The McGraw-Hill Companies, Inc.
-------------------------------
Consolidated Balance Sheet
--------------------------
<CAPTION>
March 31, Dec. 31, March 31,
1997 1996 1996
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 4 $ 3,430 $ 14,350
Accounts receivable (net of allowance
for doubtful accounts and sales
returns) (Note 3) 739,750 879,466 684,117
Receivable from broker-dealers and
dealer banks (Note 4) 5,463 2,473 8,149
Inventories (Note 3) 308,032 273,158 268,008
Prepaid income taxes 108,262 106,464 67,075
Prepaid and other current assets 101,410 84,592 70,578
---------- ---------- ----------
Total current assets 1,262,921 1,349,583 1,112,277
---------- ---------- ----------
Prepublication costs (net of accumulated
amortization) (Note 3) 369,578 353,064 298,364
Investments and other assets:
Investment in Rock-McGraw, Inc. - at
equity 68,225 66,899 63,036
Prepaid pension expense 105,978 104,515 100,009
Other 156,427 150,373 148,393
---------- ---------- ----------
Total investments and other assets 330,630 321,787 311,438
---------- ---------- ----------
Property and equipment - at cost 833,709 835,680 829,553
Less - accumulated depreciation 535,300 524,187 504,458
---------- ---------- ----------
Net property and equipment 298,409 311,493 325,095
Goodwill and other intangible assets - at
cost (net of accumulated amortization) 1,290,539 1,306,312 957,649
---------- ---------- ----------
$3,552,077 $3,642,239 $3,004,823
========== ========== ==========
</TABLE>
-4-
<PAGE>
<TABLE>
The McGraw-Hill Companies, Inc.
-------------------------------
Consolidated Balance Sheet
--------------------------
<CAPTION>
March 31, Dec. 31, March 31,
1997 1996 1996
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 232,826 $ 24,518 $ 128,680
Accounts payable 220,582 241,736 186,120
Payable to broker-dealers and dealer
banks (Note 4) 5,295 2,400 5,985
Accrued liabilities 143,026 232,024 121,229
Income taxes currently payable 90,806 235,573 71,915
Unearned revenue 225,899 229,216 250,408
Other current liabilities 235,252 253,196 188,103
---------- ---------- ----------
Total current liabilities 1,153,686 1,218,663 952,440
---------- ---------- ----------
Other liabilities:
Long-term debt (Note 5) 557,223 556,850 556,655
Deferred income taxes 144,108 150,319 136,038
Accrued postretirement healthcare and
other benefits 198,266 198,709 202,451
Other non-current liabilities 156,429 156,580 126,297
---------- ---------- ----------
Total other liabilities 1,056,026 1,062,458 1,021,441
---------- ---------- ----------
Total liabilities 2,209,712 2,281,121 1,973,881
---------- ---------- ----------
Shareholders' equity (Note 6):
Capital stock 102,933 102,933 102,933
Additional paid-in capital 43,743 37,473 36,969
Retained income 1,374,038 1,394,884 1,013,607
Foreign currency translation adjustments (66,040) (57,302) (57,051)
---------- ---------- ----------
1,454,674 1,477,988 1,096,458
Less - common stock in treasury-at cost 95,496 107,410 51,859
unearned compensation on
restricted stock 16,813 9,460 13,657
---------- ---------- ----------
Total shareholders' equity 1,342,365 1,361,118 1,030,942
---------- ---------- ----------
$3,552,077 $3,642,239 $3,004,823
========== ========== ==========
</TABLE>
-5-
<PAGE>
<TABLE>
The McGraw-Hill Companies, Inc.
-------------------------------
Consolidated Statement of Cash Flows
------------------------------------
For The Three Months Ended March 31, 1997 And 1996
--------------------------------------------------
<CAPTION>
1997 1996
--------- ---------
(In thousands)
<S> <C> <C>
Cash flows from operating activities
- ------------------------------------
Net income $ 14,986 $ 16,192
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation 17,816 17,765
Amortization of goodwill and intangibles 12,392 8,916
Amortization of prepublication costs 17,958 13,945
Provision for losses on accounts receivable 21,526 18,419
Other 2,535 812
Changes in assets and liabilities net of effect of
acquisitions and dispositions:
Decrease in accounts receivable 112,858 102,639
Increase in inventories (36,069) (25,964)
Increase in prepaid and other current assets (19,385) (13,611)
Decrease in accounts payable and accrued expenses (109,441) (96,842)
(Decrease)/increase in unearned revenue (3,125) 8,557
Decrease in other current liabilities (10,491) (9,133)
Decrease in interest and income taxes currently payable (150,821) (3,011)
(Decrease)/increase in prepaid/deferred income taxes (1,838) 48
Net change in other assets and liabilities (2,984) (1,526)
- --------------------------------------------------- --------- ---------
Cash (used for)/provided by operating activities (134,083) 37,206
- --------------------------------------------------- --------- ---------
Investing activities
- --------------------
Investment in prepublication costs (37,010) (39,029)
Purchases of property and equipment (11,223) (6,746)
Acquisition of businesses (2,852) (25,000)
Disposition of property, equipment and businesses 1,595 4,985
- --------------------------------------------------- --------- ---------
Cash used for investing activities (49,490) (65,790)
- --------------------------------------------------- --------- ---------
Financing activities
- --------------------
Additions to short-term debt - net 209,296 57,634
Dividends paid to shareholders (35,832) (33,063)
Exercise of stock options 8,606 11,178
Other (1,923) (3,065)
- --------------------------------------------------- --------- ---------
Cash provided by financing activities 180,147 32,684
- --------------------------------------------------- --------- ---------
Net change in cash and equivalents (3,426) 4,100
Cash and equivalents at beginning of period 3,430 10,250
- --------------------------------------------------- --------- ---------
Cash and equivalents at end of period $ 4 $ 14,350
========= =========
</TABLE>
-6-
<PAGE>
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 months ended March 31,
1997 and 1996 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, 1996.
Certain prior year amounts have been reclassified for comparability
purposes.
<TABLE>
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 ended March 31, 1997 and
1996 follows:
<CAPTION>
1997 1996
-------------------- ---------------------
Operating Operating
Revenue Profit Revenue Profit
--------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Educational and Professional
Publishing $196,857 $(42,551) $165,904 $(31,421)
Financial Services 234,928 74,680 213,107 66,177
Information and Media Services 221,150 17,928 204,840 17,005
-------------------------------- -------- -------- -------- --------
Total operating segments 652,935 50,057 583,851 51,761
General corporate expense - (13,696) - (13,083)
Interest expense - net - (11,384) - (11,419)
-------------------------------- -------- -------- -------- --------
Total company $652,935 $ 24,977* $583,851 $ 27,259*
======== ======== ======== ========
<FN>
*Income before taxes on income.
</FN>
</TABLE>
-7-
<PAGE>
The McGraw-Hill Companies, Inc.
-------------------------------
Notes to Financial Statements
-----------------------------
<TABLE>
3. The allowance for doubtful accounts and sales returns, the components of
inventory and the accumulated amortization of prepublication costs were as
follows:
<CAPTION>
March 31, Dec. 31, March 31,
1997 1996 1996
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Allowance for doubtful accounts $ 90,182 $ 85,965 $ 81,534
========= ========= =========
Allowance for sales returns $ 63,061 $ 76,295 $ 33,592
========= ========= =========
Inventories:
Finished goods $ 247,751 $ 219,295 $ 205,187
Work-in-process 25,300 19,887 24,003
Paper and other materials 34,981 33,976 38,818
--------- --------- ---------
Total inventories $ 308,032 $ 273,158 $ 268,008
========= ========= =========
Accumulated amortization of
prepublication costs $ 459,863 $ 486,960 $ 367,848
========= ========= =========
</TABLE>
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 $170 million of matched purchase and sale commitments at
March 31, 1997. Only those transactions not closed at the settlement
date are reflected in the balance sheet as receivables and payables.
<TABLE>
5. A summary of long-term debt follows:
<CAPTION>
March 31, Dec. 31, March 31,
1997 1996 1996
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
9.43% senior notes due 2000 $ 250,000 $ 250,000 $ 250,000
Commercial paper supported by
bank revolving credit agreement 300,000 300,000 300,000
Other 7,223 6,850 6,655
--------- --------- ---------
Total long-term debt $ 557,223 $ 556,850 $ 556,655
========= ========= =========
</TABLE>
-8-
<PAGE>
The McGraw-Hill Companies, Inc.
-------------------------------
Notes to Financial Statements
-----------------------------
<TABLE>
6. Common shares approved for issuance for conversions and stock based awards
were as follows:
<CAPTION>
March 31, Dec. 31, March 31,
1997 1996 1996
--------- --------- ---------
<S> <C> <C> <C>
$1.20 convertible preference stock
at the rate of 6.6 shares for each
share of preference stock 9,161 9,161 9,346
Stock based awards 5,819,300 6,350,994 6,651,336
--------- --------- ---------
5,828,461 6,360,155 6,660,682
========= ========= =========
</TABLE>
At the company's annual meeting on April 30, 1997, the shareholder's
approved a proposal to increase the number of shares approved for issuance
under the 1993 Key Employee Stock Incentive Plan by an additional 4.9
million shares. These shares are not included in the table above.
<TABLE>
7. Cash dividends per share declared during the three months ended March 31,
1997 and 1996 were as follows:
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Common stock $.36 $.33
Preference stock .30 .30
</TABLE>
8. In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, Earnings per Share.
Under the new standard, which must be adopted on December 31, 1997, the
company will be required to change the method used to compute earnings per
share and to restate prior periods presented. A dual presentation of basic
and diluted earnings per share will be required. The basic earnings per
share calculation, which will replace primary earnings per share, will
exclude the dilutive impact of stock options and other common share
equivalents. The dilutive earnings per share calculation, which will
replace fully diluted earnings per share, will include common share
equivalents. The adoption of SFAS No. 128 is not expected to have a
significant impact on earnings per share for the three months ended March
31, 1997 and 1996.
-9-
<PAGE>
Item 2. Management's Discussion and Analysis of Operating
-------------------------------------------------
Results and Financial Condition
-------------------------------
Operating Results - Comparing Three Months Ended March 31, 1997 and 1996
- ------------------------------------------------------------------------
Consolidated Review
- -------------------
Operating revenues for the first quarter grew $69.1 million, or 11.8%, over the
1996 quarter to $652.9 million. All three operating segments had revenue
increases. The revenue increase reflects significant growth at S&P Ratings
Services, the acquisition of the former Times Mirror Higher Education Group,
higher secondary school publishing sales and growth at Business Week and the
Construction Information Group.
Net income declined $1.2 million, or 7.4%, to $15.0 million and earnings per
share were 15 cents compared to 16 cents a year ago. The reduction in earnings
reflects the increased seasonality of the company's business caused by the
October 1996 exchange of the Shepard's/McGraw-Hill legal publishing business for
the Times Mirror Higher Education Group and marketing costs for major state
adoption opportunities later this year. 1997's first quarter results reflect 3-
to-4 cents dilution resulting from last year's exchange transaction due to the
seasonality of the higher education business as compared to Shepard's and the
timing of integration savings. The first quarter represents the company's
smallest quarter due to the seasonal aspects of some of the company's
businesses, primarily the educational publishing operations.
Total expenses in 1997 increased $69.8 million, or 12.7%, due to the operating
costs of the acquired higher education business, marketing costs for school
publishing adoption sales later this year, volume-related expenses due to the
revenue growth and expenses associated with new products and initiatives. The
increase in depreciation and amortization expenses is due to the acquisition of
the Times Mirror Higher Education Group.
Net interest expense in the first quarter of $11.4 million declined slightly
from the prior year. Commercial paper borrowing rates declined modestly from
5.5% in 1996 to 5.4% in 1997. Average commercial paper borrowing levels were
comparable to the prior year.
The provision for taxes as a percentage of income before taxes was 40.0% in 1997
compared to 40.6% in 1996. The reduction in the effective tax rate reflects
lower state taxes resulting primarily from the acquisition of the Times Mirror
Higher Education Group.
Segment Review
- --------------
Educational and Professional Publishing revenues increased $31.0 million, or
18.7%. 1997 revenues included $33 million from the former Times Mirror Higher
Education properties compared to $15 million contributed by Shepard's last year.
Educational Publishing revenues improved from secondary publishing backlist
sales, testing and supplementary products. International publishing revenues
improved due to sales of the Times Mirror products. The segment's operating
loss, reflecting typical first quarter seasonal losses in educational
-10-
<PAGE>
publishing, increased 35.4% to $42.6 million, due to the added impact of the
expanded higher education business as well as marketing costs associated with
major state adoption opportunities later this year. The company is rapidly
integrating its college publishing division with the acquired higher education
business, eliminating more than 500 positions and consolidating facilities and
systems. The integration will be substantially completed by June 1997.
Financial Services' revenue increased $21.8 million, or 10.2%, while operating
profit improved $8.5 million, or 12.8%. Standard & Poor's Ratings Services'
revenues and profits improved due to increased new issue volume in the U.S.
corporate bond market, particularly the high yield sector, reflecting the
favorable interest rate environment. New rating products and global expansion
also significantly contributed to the strong performance. Standard & Poor's
Financial Information Services revenue improved modestly due to growth in the
retail and institutional segments offseting continued weakness in municipal
securities services while operating profit declined modestly reflecting
investments in new products to be launched later in 1997.
Information and Media Services' revenue increased $16.3 million, or 8.0%, and
operating profit improved $0.9 million, or 5.4%. Revenues improved at Business
Week due to strong advertising page growth; profits grew at a lower rate due to
investments in circulation and promotion. Revenues and profits declined in the
Information Technology and Communications Group due to reduced advertising pages
while the healthcare publications had significant growth due to increased pages
and acquisitions late last year. Revenues and profits improved in the
Construction Information Group due to expanded electronic product revenue and
increased advertising in Architectural Record magazine. Broadcasting achieved
modest revenue growth, despite the absense of last year's political advertising,
while operating profit improved due to cost reductions.
Financial Condition
- -------------------
The company continues to maintain a strong financial position. Cash used for
operating activities in the first quarter totaled $134 million, which reflects
$150 million in tax payments on last year's gain on the exchange of
Shepard's/McGraw-Hill for the Times Mirror Higher Education Group. Total debt
increased $209 million from year-end reflecting the tax payments as well as
expenditures for the integration of the higher education businesses, seasonal
spending for inventory and marketing costs for school publishing adoptions and
prepublication spending for publishing programs. The company's strong presence
in school publishing and expanded higher education business significantly impact
the seasonality of its earnings and borrowing patterns during the year, with the
company borrowing during the first half of the fiscal year and generating cash
in the second half of the year, primarily in the fourth quarter.
Commercial paper borrowings at March 31, 1997 totaled $532 million, an increase
of $210 million from December 31, 1996. Commercial paper debt is supported by a
$800 million revolving credit agreement with a group of banks terminating in
February, 2002 and $300 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 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.
-11-
<PAGE>
Accounts receivable before reserves of $893 million decreased $149 million from
the end of 1996 due primarily to the seasonal nature of the company's
educational publishing businesses. Inventories increased $35 million to $308
million from the end of 1996 due primarily to inventory purchases for school
publishing adoptions later this year.
Net prepublication costs increased $17 million from the end of 1996 to $370
million due to spending for school publishing 1998 adoption year programs and
higher education and professional publishing titles. Prepublication cost
spending in the first quarter totaled $37 million, a decline of $2 million from
last year's first quarter. Spending is expected to increase over the remainder
of the year. Purchases of property, plant and equipment of $11 million were $4
million higher than the comparable period last year; the purchases were
primarily for computer equipment and the integration of the Times Mirror Higher
Education properties.
In January 1996, the company's Board of Directors approved a stock repurchase
program authorizing the purchase of up to four million shares of the company's
common stock. In 1996, primarily in the second quarter, 1.4 million shares were
repurchased at a cost of $63.3 million. No shares were repurchased in the first
quarter of 1997; the company intends to repurchase additional shares later in
the year. Purchases under the program may be made from time to time dependent
on market conditions. The repurchased shares will be used for general corporate
purposes, including the issuance of shares for the exercise of employee stock
options.
In April 1997 the company signed a letter of intent to lease approximately
935,000 square feet of office space for a term of twenty years to house its
financial services' operations in downtown New York. The lease replaces several
current leases that expire in 1999. The company expects to sign a definitive
lease agreement later this year.
"Safe Harbor Statement under the Private Securities Litigation Reform Act of
- ----------------------------------------------------------------------------
1995"
- -----
This section, as well as other portions of this document, includes certain
forward-looking statements about the company's business, new products, sales,
expenses, cash flows and operating and capital requirements. Such forward-
looking statements include, but are not limited to: the timing of integration
actions related to the Times Mirror Higher Education Group; Educational
Publishing's level of success in 1997 adoptions; the level of prepublication
cost spending in 1997; shares to be reacquired under the share repurchase plan;
and the level of future cash flow and debt levels.
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, the successful marketing of new products, the effect of competitive
products and pricing, and the timing of reducing costs in the newly merged
higher education business.
-12-
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
-----------------
In Item 1 of Part II of Registrant's Form 10-Q for the quarter ended
June 30, 1996, Registrant reported that a Complaint had been filed on
June 11, 1996 in the United States Bankruptcy Court, Central District
of California, in an action captioned County of Orange v. McGraw-Hill
-------------------------------
Companies, Inc., d/b/a Standard & Poor's (Case No. SA 94-22272-JR;
----------------------------------------
Adversary No. SA 96-01624-JR). The Complaint alleged that Standard &
Poor's breached its contracts with Orange County, was professionally
negligent and aided and abetted the County's officers in breaching
their fiduciary duty by, inter alia, assigning unduly high ratings to
----- ----
debt instruments issued by the County and by failing to advise the
County's Board of Supervisors of the illegal acts being committed by
the County's officers. On October 17, 1996, the United States
District Court, Central District of California, granted Registrant's
motion to withdraw the Bankruptcy Court reference. The action was
transferred to the United States District Court for the Central
District of California (Case No. SA CV 96-765-GLT) upon the filing on
December 4, 1996 of the Bankcuptcy Court's ruling on Registrant's
motion to dismiss the Complaint. In that ruling, the Bankruptcy
Court granted Registrant's motion to dismiss the County's aiding and
abetting claim, but denied it as to the breach of contract and
professional negligence claims. Registrant appealed this decision to
the District Court which, on March 18, 1997, dismissed the County's
professional negligence claim, with leave to amend. On April 9,
1997, the County filed an Amended Complaint for breach of contract
and professional malpractice. On April 28, 1997, Registrant filed a
motion to dismiss the professional malpractice claim. The Registrant
continues to believe that the County's allegations lack merit and
intends to vigorously contest the action.
Item 6. Exhibits and Reports on Form 8-K Page Number
-------------------------------- -----------
(a) Exhibits
(10) Credit agreement dated as of February 19, 1997, among
the Registrant, the lenders listed therein, and The Chase
Manhattan Bank, as administrative agent, incorporated by
reference from Registrant's Form 8-K dated February 19, 1997.
(12) Computation of Ratio of Earnings to Fixed Charges. 15
(27) Financial Data Schedule. 16
(b) Reports on Form 8-K
A Report on Form 8-K was filed on February 19, 1997. Pursuant to
said Report, Item 5 was reported upon.
-13-
<PAGE>
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: 05/12/97 By Robert J. Bahash
------------------ -------------------------------
Robert J. Bahash
Executive Vice President
and Chief Financial Officer
Date: 05/09/97 By Thomas J. Kilkenny
------------------ -------------------------------
Thomas J. Kilkenny
Vice President and Controller
Date: 05/12/97 By Kenneth M. Vittor
------------------ -------------------------------
Kenneth M. Vittor
Senior Vice President
and General Counsel
-14-
<PAGE>
<TABLE>
Exhibit (12)
The McGraw-Hill Companies, Inc.
-------------------------------
Computation of Ratio of Earnings to Fixed Charges
-------------------------------------------------
Periods Ended March 31, 1997
----------------------------
<CAPTION>
Three Twelve
Months Months
--------- ---------
(In thousands)
<S> <C> <C>
Earnings
Earnings from continuing operations
before income tax expense (Note)...... $ 23,651 $ 807,336
Fixed charges........................... 18,587 76,358
--------- ---------
Total Earnings....................... $ 42,238 $ 883,694
========= =========
Fixed Charges (Note)
Interest expense........................ $ 12,045 $ 51,145
Portion of rental payments deemed to be
interest.............................. 6,542 25,213
--------- ---------
Total Fixed Charges.................. $ 18,587 $ 76,358
========= =========
Ratio of Earnings to Fixed Charges 2.3x 11.6x
<FN>
(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, 1997 includes a $418.7 million gain on the
exchange of Shepard's/McGraw-Hill for the Times Mirror Higher Education
Group and a one-time integration charge of $25.0 million.
</FN>
</TABLE>
-15-
</PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 4
<SECURITIES> 0
<RECEIVABLES> 892,993
<ALLOWANCES> 153,243
<INVENTORY> 308,032
<CURRENT-ASSETS> 1,262,921
<PP&E> 833,709
<DEPRECIATION> 535,300
<TOTAL-ASSETS> 3,552,077
<CURRENT-LIABILITIES> 1,153,686
<BONDS> 0
14
0
<COMMON> 102,919
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,552,077
<SALES> 652,935
<TOTAL-REVENUES> 652,935
<CGS> 620,200
<TOTAL-COSTS> 620,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 21,526
<INTEREST-EXPENSE> 11,384
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</TABLE>
