McGraw-Hill
Investor
Fact Book
2012
McGraw-Hill McGraw-Hill
Financial
Education
Creating Two Powerful New Companies
Principal Executives
Harold McGraw III
Chairman, President and
Chief Executive Officer
Corporate
Operations
John L. Berisford
Executive Vice President
Human Resources
Louis V. Eccleston
President, S&P Capital IQ;
Chairman, S&P Dow Jones Indices
Jack F. Callahan, Jr.
Executive Vice President and
Chief Financial Officer
Glenn S. Goldberg
President
Commodities & Commercial Markets
D. Edward Smyth
Executive Vice President,
Corporate Affairs and
Executive Assistant to the
Chairman and Chief Executive Officer
Douglas L. Peterson
President
Standard & Poor’s Ratings Services
Charles L. Teschner, Jr.
Executive Vice President
Global Strategy
Lloyd G. Waterhouse
President & CEO
McGraw-Hill Education
Kenneth M. Vittor
Executive Vice President and
General Counsel
In Memoriam
Donald S. Rubin
1934 – 2012
The 2012 Investor Fact Book is dedicated to the memory of our friend and
colleague, Donald Rubin (1934 – 2012). Don was Senior Vice President of
Investor Relations at the time of his death, a position he held since 1993. He
served The McGraw-Hill Companies with excellence and the highest integrity
for 52 years and will always be remembered for his immense contribution
over that time. We relied so much on his good judgment as he consistently
represented the best interests of shareholders.
Don spoke with authority, reflecting his deep knowledge of the company.
Investors and analysts appreciated his witty, informative, and truthful insights
about McGraw-Hill and its markets. A journalist by training, Don applied his
craft to investor relations and created simple, powerful stories for investors.
One manifestation is the annual Investor Fact Book. From its modest beginnings
in 1984, the “Fact Book” flourished under Don’s leadership and, as a result, is
considered a trusted resource for insight into McGraw-Hill’s businesses,
markets, and prospects.
To honor Don’s legacy as a reporter and his outstanding contribution to
the company, The McGraw-Hill Companies established the Donald S. Rubin
McGraw-Hill Memorial Scholarship Fund at City University of New York’s
Graduate School of Journalism to inspire future generations of journalists.
McGraw-Hill
Growth and Value Plan
2–3
Creating Two Powerful New Companies
McGraw-Hill Financial
McGraw-Hill Education
4–5
A Leader in Content and Analytics
for the Global Capital, Commodities,
and Commercial Markets
6–7
STANDARD & POOR’S RATINGS SERVICES
8 – 11
12
Global Debt Markets
Ratings Diversification
13
S&P CAPITAL IQ
32
14
Integrating New Capabilities into
S&P Capital IQ’s Platform
Enterprise Solutions
Desktop Solutions
Research & Analytics
33
19
S&P DOW JONES INDICES
40 – 41
20 – 21
Benchmarks
22 – 23
Platts
15
16 – 17
18
COMMODITIES
COMMERCIAL MARKETS
24
25
26
J.D. Power and Associates
McGraw-Hill Construction
Aviation Week
28 – 29
A Leading Provider of Customized and
Adaptive Digital Learning Solutions
HIGHER EDUCATION, PROFESSIONAL
AND INTERNATIONAL GROUP
30 – 31
34 – 35
Digital Workflow Solutions for
Teaching and Learning
Adaptive Learning Suite
Institutional Solutions
Professional Markets
SCHOOL EDUCATION GROUP
36 – 37
38 – 39
42
43
44 – 45
K–12 Digital Solutions
Assessment and Reporting Market
Pre-K–16 Public Education: Funding,
Expenditures, and Enrollments
Growing Enrollments in Key
Adoption States
Pre-K–12 Market Sales
Elementary and Secondary School
State Adoption Schedules
Eleven-Year Financial Review
47
The McGraw-Hill Companies
56
48
Free Cash Flow | Net Debt to EBITDA |
Cash Returned to Shareholders
Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA)
57
Capital Investments: Investments,
Depreciation, and Amortization
58 – 59
Acquisitions and Divestitures
60 – 61
Advancing Total Shareholder Value:
Dividend Record | Share Repurchase and
Stock History | Debt Profile
62 – 63
Items Affecting Comparability of Results
49
Consolidated Profit and Loss
50
Operating Segments at a Glance
51
Quarterly Results: 2011 vs. 2010
52 – 53
Operating Segment Trends
54 – 55
Expanding Globally: Foreign Source
Revenue by Segment
Ticker Symbol NYSE: MHP
2012 Investor Fact Book
1
McGraw-Hill Growth and Value Plan
Creating Two Powerful New Companies
2012 will be remembered as an inflection point in The McGraw-Hill Companies’ history.
It will mark the culmination of the Company’s Growth and Value Plan that was announced
in September 2011. This plan was the result of an extensive review in which the Board
of Directors determined that the creation of two independent companies is the best and
most reliable way to generate superior shareholder value. The centerpiece of the plan
is the creation of two powerful new companies:
McGraw-Hill
Financial
McGraw-Hill
Education
The separation is
on track to occur by
the end of 2012
A leader in content and
analytics for the global
capital, commodities,
and commercial markets
A leading provider
of customized and
adaptive digital
learning solutions
Advancing the
Growth and
Value Plan
The Growth and Value Plan
includes several elements:
Separation
New operating models
The separation will provide each company with
opportunities and benefits:
Strategic Focus
Allow each independent company to design and
implement corporate strategies and policies that are
based on the industries that each serves and its
specific business characteristics, including customers,
sales cycles, and product life cycles.
Access to Capital
Remove the need for the businesses to compete
internally for capital. Instead, each company will
have direct access to the capital markets to fund
its respective growth strategies and to establish
an appropriate capital structure for its particular
business needs.
Strategic Flexibility
Provide each independent company increased
strategic flexibility to make acquisitions and form
partnerships and alliances in its target markets, and
allow each company to fund future acquisitions,
the value of which will be more closely aligned with
the performance of its businesses.
Investor Choice
Provide investors in each company with a more
targeted investment opportunity with distinct
investment and business characteristics, including
different opportunities for growth, capital structure,
business models, and financial returns.
2
McGraw-Hill
Cost reduction
Share repurchases
Funding both organic growth and
tuck-in acquisitions
Overview
McGraw-Hill Financial
McGraw-Hill Education
A leading provider of content and analytics to the
capital, commodities, and commercial markets,
McGraw-Hill Financial will build on its specialized
market knowledge to create integrated solutions to
meet emerging customer needs. McGraw-Hill
Financial will be a focused operating company and
will be reported in five business lines:
A leading provider of customized and adaptive digital
learning solutions, McGraw-Hill Education is the
second-largest global education company in the world.
McGraw-Hill Education will leverage its rich history
and digital capabilities to thrive as a stand-alone
company and will be reported in two business lines:
Standard & Poor’s Ratings Services
Higher Education, Professional and
International Group
S&P Capital IQ
School Education Group
S&P Dow Jones Indices
McGraw-Hill Education will drive growth by aligning
its capabilities with key market trends and improve
profitability by optimizing its core business. To
achieve these goals, McGraw-Hill Education will
strive to:
Commodities
Commercial Markets
Growth at McGraw-Hill Financial is expected to
come from the continued strong performance of its
well-known brands, targeted acquisitions and
alliances, and incremental growth stemming from
its ability to capitalize on industry trends which are
increasing customer needs for integrated solutions
across asset classes.
McGraw-Hill Financial plans to focus on the
following opportunities:
Integrated Solutions: Provide integrated solu-
tions within and across market segments
Distribution: Capture additional revenue by
leveraging and expanding its strong channel
relationships
Geographic Penetration: Use its vast global
footprint to capitalize on opportunities in mature and growing markets
Scalable Capabilities: Create and leverage
efficiency and effectiveness through common
platforms, processes, and standards
Drive Operational Excellence: Optimize its
core business for profitability
Reimagine Learning: Focus primarily on digital,
data-enablement, and services to improve
student learning and success
Capture Growth Opportunities: Leverage
expertise as a content and learning company
to capture global opportunities as well as to
grow in adjacent markets, and market spaces
in between traditional education, such as
career readiness
The actions McGraw-Hill Education is taking to
reduce costs and streamline its operational structure
will enable aggressive pursuit of a strategy that
focuses on high-growth opportunities in digital
learning and education services. By lowering its cost
base while maintaining strong cash flow from
operations, McGraw-Hill Education will capitalize on
secular shifts in the education market and maximize
return on invested capital.
2012 Investor Fact Book
3
McGraw-Hill Financial
The newly named McGraw-Hill Financial is positioned as a leader in the
world’s capital, commodities, and commercial markets. Its brands
include Standard & Poor’s Ratings Services, S&P Dow Jones Indices(1),
S&P Capital IQ, Platts, J.D. Power and Associates, McGraw-Hill
Construction, and Aviation Week.
A Foundation for Growth
McGraw-Hill Financial is creating a scalable business with a strong
trajectory for future growth. Its unique offerings will further integrate
content, analytics, and other value-added products, services, and
solutions for customers across the world.
2011
2012+
Built foundation for
future growth
Clear operating
model, execution
framework, and
integrated team
Realigned S&P Capital IQ/
S&P Indices to unlock
value by integrating
financial information,
data, and analytics to
deliver a suite of products
across asset classes
Operating with a clear
focus on leveraging scale,
improving and integrating
vertical operations, and
combining deep content
expertise to create new
solutions for customers
Scalable operating
model to allow for
meaningful growth
Proven operating model
that can scale organically and can also utilize
unique capabilities from
strategic acquisitions
$4 Billion Pro-forma 2011 Revenue
McGraw-Hill Financial
(dollars in millions)
Standard & Poor’s Ratings
Services $1,767.0
S&P Capital IQ $1,031.0
S&P Indices(1) $323.0
Commodities $419.0
Commercial Markets $477.0
(1) The S&P Dow Jones Indices joint venture was launched on June 29, 2012
Note: Pro-forma 2011 revenue is not intended to represent what the results for the new
McGraw-Hill Financial would have been had the separation already occurred
4
McGraw-Hill
Global
industry
leader
Serves
interconnected
markets
Capitalizes
on global
growth trends
Provides high-value
benchmarks,
information, data,
and solutions
Capital markets
Catalyst for markets
Commercial markets
Globalization
of capital and
commodities
markets and
industries; rise in
data-driven decision
making; increased
focus on managing
volatility and risk
Commodities
markets
Expand global
footprint, including
in high-growth
BRIC countries
(Brazil, Russia, India,
and China)
McGraw-HIll Financial
McGraw-Hill Financial
Standard &
Poor’s Ratings
Services
Credit ratings,
research, and
analytics
A leading provider of content and analytics, delivering integrated
solutions through iconic brands and interconnected markets
S&P Capital IQ
Multi-asset class
data, research,
benchmarks, and
analytics
S&P Dow
Jones Indices(1)
Maintains a variety
of investable and
benchmark indices
McGraw-Hill Financial will accelerate growth by
expanding cross-business synergies:
Integrated Solutions
Provide integrated solutions within and
across market segments that fill evolving
customer needs
Quantitatively derived credit ratings have been created by
S&P Capital IQ from Standard & Poor’s Ratings’ historical
data to drive credit analysis by clients
Distribution
Capture additional revenue by leveraging
and expanding strong channel relationships
(proprietary, channel partners, direct data
feeds, and Internet and third-party networks)
Unique distribution arrangements to carry ratings and
research across business units
S&P Indices and Platts jointly negotiated new contracts
in 2011 with the CME Group to align economic
incentives and encourage new product development
Geographic Expansion
Commodities
Provider of energy,
petrochemicals, and
metals information
through Platts
Commercial
Markets
Leading brands
in key markets
through J.D. Power
and Associates,
McGraw-Hill
Construction, and
Aviation Week
Recurring Revenue:
An Important Value Driver
Non-Transaction and Transaction
Standard & Poor’s Ratings Services
differentiates its revenue between
non-transactional and transactional
Standard & Poor’s Ratings Services
(dollars in millions)
Non-transaction(a, b)
Transaction(c)
Total
Subscription and Non-Subscription
S&P Capital IQ, S&P Indices,
Commodities, and Commercial
Markets differentiate their
revenue between subscription
and non-subscription
S&P Capital IQ/S&P Indices
(dollars in millions)
Subscription(d)
Non-subscription(e)
Total
Use vast global footprint to capitalize on
opportunities in mature and growth markets
Commodities & Commercial Markets
S&P Capital IQ, S&P Dow Jones Indices, and Platts
utilize Standard & Poor’s Ratings Services’ global
presence and infrastructure
Subscription(f)
Non-subscription(g)
Total
Scalable Capabilities
Create and leverage efficiency and effectiveness through common platforms, processes,
and standards
CRISIL and S&P Capital IQ have created intellectual
property with strength in financial data collection
and analytical support that is scalable and can be
commercialized
2011
$ 1,116.0
$ 651.0
$ 1,767.0
(dollars in millions)
2011
$ 994.0
$ 360.0
$ 1,354.0
2011
$ 562.0
$ 334.0
$ 896.0
(a) Revenue primarily related to annual fees for frequent
issuer programs and surveillance
(b) Includes intersegment royalty revenue from S&P
Capital IQ/S&P Indices of $63 million
(c) Revenue related to ratings of publicly-issued debt,
bank loan ratings, and corporate credit estimates
(d) Revenue related to credit ratings-related information products, S&P Capital IQ platform, investment
research products, and other data subscriptions
(e) Revenue related to fees based on assets underlying
exchange-traded funds, as well as certain advisory,
pricing, and analytical services
(f) Revenue related to Platts’ real-time news, market
data and price assessments, along with other print
and digital information products primarily serving
the energy, automotive, construction, aerospace and
defense markets
(g) Revenue related to syndicated and proprietary research
studies, advertising, consulting engagements and events
2012 Investor Fact Book
5
STANDARD & POOR’S RATINGS SERVICES
Expanding World of Standard & Poor’s Ratings Services
Standard & Poor’s Ratings Services is a leading provider of
credit ratings, research, and analytics. As part of the world’s
financial infrastructure, Standard & Poor’s plays a vital role
in bringing transparency and comparability to the financial
markets, helping investors and others measure and mitigate
credit risk.
Credit Ratings, Research,
Analytics
Standard & Poor’s
Global Footprint
Thought Leadership
Reports & Forums
The Credit Overhang
Series
Global Economic
Outlook: Growing
Pains
The Dodd-Frank Act
Two Years Later
Insurance 2012:
Investing in a Global
Industry
28th Annual
Insurance
Conference
Asia-Pacific: Global
Risks Could Eclipse
Economic Growth In
2012
The Asset named Standard & Poor’s
”Best Rating Agency for Islamic Finance”
2012: Will Greece
Exit the Eurozone?
The Pension Funding
Pinch
2012 Housing
Conference—A New
Foundation: Different
Fundamentals for
Housing Finance
Standard & Poor’s India-based credit rating
agency, CRISIL, completed the acquisition
of Coalition Development Ltd. in 2012
Standard & Poor’s acquired a
4.9% stake in RAM Holdings, the
leading local rating agency in
Malaysia, in 2011
Standard & Poor’s acquired a 5% stake
in the parent company of TRIS Ratings
Co. Ltd., Thailand’s leading credit
agency, in 2011
Standard & Poor’s Ratings
Services has more than 1,400
analysts in 23 countries
Mobile Access to Standard &
Poor’s Global Perspective on
Credit Market Developments
6
FinanceAsia named Standard & Poor’s the
“Most Influential Credit Rating Agency” in the
region in 2011 for the 11th consecutive year
Standard & Poor’s was approved as
a registered credit rating agency in
the European Union in 2011
„ Standard & Poor’s office „ Standard & Poor’s affiliate
Standard & Poor’s CreditMatters’ mobile, interactive offerings keep
portfolio managers, credit officers, risk managers, and professionals
current on Standard & Poor’s global perspective regarding important
credit market developments, including the latest rating actions, news,
and commentary. Offerings include:
CreditMatters Mobile
CreditMatters eReports
CreditMatters Multimedia
CreditMatters Mobile is a new app
that provides an easy way to keep
up with Standard & Poor’s global
perspective on key credit market
developments
CreditMatters eReports are interactive
magazines designed for the iPad and
the Web. They deliver articles, video,
audio, charts, and other related
materials from Standard & Poor’s
global team of rating analysts and can
be downloaded for offline viewing
CreditMatters Multimedia features
video interviews with Standard &
Poor’s rating analysts and provides
extensive coverage on current topics
in finance, credit markets, and the
global economy
www.standardandpoors.com/mobile
http://www.standardandpoors.com/ereports
http://video.standardandpoors.com/
McGraw-Hill
McGraw-HIll Financial
Providing Valued Research and
Opinions for Market Participants
Standard & Poor’s offers a unique combination of
global coverage and local insight
Globally, Standard & Poor’s rated nearly
$3.5 trillion in new debt in 2011
With more than 1,400 credit
analysts in 23 countries, and
more than 150 years’ experience
assessing credit risk, Standard &
Poor’s Ratings Services offers
a unique combination of global
coverage and local insight.
Standard & Poor’s research and
opinions about relative credit risk
provide market participants with
information and independent
benchmarks that help to support
the growth of transparent, liquid
debt markets worldwide.
Over the past few years, Standard
& Poor’s has strengthened its
ratings process to make it even
more transparent. Since 2009,
Standard & Poor’s has invested
more than $200 million in
systems, training, and analytics to
enhance the quality of its ratings.
Standard & Poor’s publishes
more than a million credit ratings
on debt issued by sovereign,
municipal, corporate, and financial
sector entities. Ratings will
continue to play a strong role
as bond issuance grows and
alternative lenders and investment
managers increase their presence
in the capital markets. Standard &
Poor’s goal is to become the
leading provider of global credit
benchmarks and research across
industries, asset classes, and
geographies that investors,
businesses, and markets use to
foster economic development
and growth around the world.
www. standardandpoors.com
Standard & Poor’s Ratings Track Record: Meeting the Test of Time
What is a Standard & Poor’s
credit rating?
Credit ratings are opinions about
credit risk. Standard & Poor’s
ratings express an opinion about
the ability and willingness of an
issuer to meet its financial obligations in full and on time. Credit
ratings can also speak to the credit
quality of an individual debt issue,
and the relative likelihood that the
issue may default.
How Standard
& Poor’s ratings
perform:
The tables (right)
show the default
rates experienced
for each rating
category over
30 years.
For example:
The 5-year cumulative
default rate for
corporate bonds
rated AAA has been
0.37%, or fewer than
four defaults for
every 1,000 ratings
The 5-year cumulative default rate for
AAA-rated structured
finance issues has
been 3.02%
The default rate tables underscore a key point: Over time,
the higher the Standard &
Poor’s rating, the fewer the
incidents of default
Global Corporate Average Cumulative Default Rates (1981–2011) (%) (a)
Rating
AAA
AA
A
BBB
BB
B
CCC/C
Investment-grade
Speculative-grade
All rated
Time horizon (years)
1
2
3
4
5
6
7
0.00 0.03 0.14 0.25 0.37 0.49 0.55
0.02 0.07 0.14 0.26 0.37 0.49 0.60
0.08 0.18 0.32 0.48 0.66 0.86 1.10
0.24 0.67 1.13 1.71 2.30 2.88 3.38
0.90 2.70 4.80 6.80 8.61 10.34 11.85
4.48 9.95 14.57 18.15 20.83 23.00 24.76
26.82 35.84 41.14 44.27 46.72 47.82 48.79
0.12 0.33 0.57 0.86 1.17 1.47 1.76
4.21 8.23 11.74 14.56 16.82 18.72 20.31
1.57 3.10 4.47 5.62 6.58 7.41 8.12
8
0.64
0.69
1.31
3.88
13.21
26.19
49.66
2.03
21.68
8.73
9
0.71
0.77
1.53
4.38
14.49
27.46
50.77
2.30
22.93
9.30
10
0.78
0.86
1.77
4.88
15.59
28.70
51.65
2.57
24.08
9.83
11
0.81
0.94
1.97
5.41
16.49
29.77
52.42
2.82
25.06
10.29
12
0.85
1.01
2.14
5.85
17.29
30.65
53.28
3.04
25.89
10.68
13
0.89
1.09
2.30
6.30
17.97
31.47
54.24
3.25
26.65
11.05
14
0.97
1.17
2.45
6.76
18.55
32.22
55.13
3.46
27.33
11.38
15
1.06
1.23
2.66
7.22
19.24
33.01
55.13
3.69
28.03
11.74
Source: Standard & Poor’s “Default, Transition and Recovery: 2011 Annual Global Corporate
Default Study and Ratings Transitions,” March 21, 2012
Global Structured Finance Cumulative
Default Rates Conditional on Survival, 1978–2011 (%) (b)
Rating
AAA
AA
A
BBB
BB
B
CCC/C
Investment-grade
Speculative-grade
All rated
1
0.12
0.31
0.60
1.41
3.21
8.06
37.76
0.54
19.18
5.14
Time horizon (years)
2
3
4
5
0.55 1.38 2.40 3.02
2.73 6.71 9.97 11.96
4.39 9.55 13.39 15.89
7.62 15.04 21.05 25.39
13.34 22.64 30.51 35.84
23.55 35.52 45.38 52.22
57.77 72.26 76.69 79.55
3.39 7.28 10.44 12.52
33.88 43.97 50.81 55.49
10.56 15.53 19.25 21.72
6
3.31
13.00
17.36
28.25
39.70
57.04
81.79
13.72
58.89
23.27
7
3.44
13.37
18.09
29.96
42.48
60.66
83.45
14.31
61.43
24.17
8
3.55
13.57
18.48
30.98
44.29
62.95
85.16
14.63
63.13
24.71
9
3.64
13.73
18.74
31.78
45.85
64.66
86.15
14.86
64.46
25.08
10
3.72
13.85
18.99
32.37
47.12
65.68
86.35
15.03
65.35
25.34
Source: Standard & Poor’s “Default Study: Global Structured Finance Default Study, 1978-2011:
Credit Quality Fell For The Fifth Consecutive Year In 2011,” March 22, 2012
(a) Average cumulative
default rates are derived
by calculating “conditional
on survival” marginal
default rates from
experiences of each static
pool and time horizon
(b) AAA ratings from the same
transaction are treated
as a single rating in the
calculation of this table
2012 Investor Fact Book
7
STANDARD & POOR’S RATINGS SERVICES
Global Debt Markets
U.S. and European Corporate Debt
Maturing: 2012*–2016
U.S. Debt Market
Standard & Poor’s Ratings Services estimates that
there is more than $7 trillion in rated corporate debt
coming due between the second quarter of 2012
and the end of 2016 for U.S. and European companies. Debt maturities are expected to range from
$1.3 trillion to nearly $2.0 trillion per annum between
2013 and 2016. Of the total, U.S. companies represent 41% and European companies represent 59%.
Investment-grade debt represents 77% of the total,
with 23% in speculative-grade debt.
Financial companies represent more than $4 trillion, or approximately
60% of the total corporate debt for U.S. and Europe. In the United
States, financial issuers account for approximately $1 trillion in bonds
and loans maturing between mid-year 2012 and 2016. In 2013 and
2014, maturing debt for European companies will total about $1 trillion
and $1.3 trillion, respectively.
Nonfinancial companies represent $2.8 trillion, or approximately 40%,
of the total $7 trillion of maturing debt from the United States
and Europe.
In 2011, Standard & Poor’s rated approximately 88% of
the $1.2 trillion of addressable debt issued in the U.S.
market compared to 90% of the addressable market
in 2010. Overall, rated debt issuance by dollar volume
in the U.S. fell approximately 14% from 2010 to 2011,
while the number of issues fell by approximately 27%.
The rated debt market is a component of the total
debt market and includes only the debt securities
issued with a rating. The rated U.S. debt market
chart (shown below) is primarily comprised of five
new-issue categories: (1) Corporates; (2) Municipals;
(3) Mortgage-Backed Securities (Residential Mortgage-Backed Securities and Commercial MortgageBacked Securities); (4) Asset-Backed Securities; and
(5) Collateralized Debt Obligations.
(annual figures; dollar volume in billions; data by domicile of issuer/assets)
Rated U.S. Debt Market (a, b, c, d, e)
S&P penetration rate as a % of rated dollar volume
U.S. and Europe: Corporate Debt Maturing
by Year (2012*-2016) (dollars in billions)
$3,500
92%
2,625
$2,000
1,750
1,500
‘06
S&P Rated Volume
500
Investment Grade
Speculative Grade
Total U.S. and Europe
United States
Financial
Investment grade
Speculative grade
Nonfinancial
Investment grade
Speculative grade
Total United States
Europe
Financial
Investment grade
Speculative grade
Nonfinancial
Investment grade
Speculative grade
Total Europe
‘12
‘13
‘14
‘15
‘16
$ 795.1
142.5
$ 937.6
$1,284.0
333.1
$1,617.1
$1,591.5
386.9
$1,978.4
$ 975.3
345.4
$ 1,320.7
$ 872.2
405.0
$ 1,277.2
2012*
2013
2014
2015
2016
$ 254.3
18.7
$ 196.9
14.8
$ 195.6
16.4
$ 154.1
19.6
$ 157.5
15.9
$ 79.0
78.5
$ 430.5
$ 184.4
186.9
$ 583.0
$ 193.8
293.9
$ 699.6
$ 150.3
263.4
$ 587.4
$ 168.4
303.4
$ 645.2
$ 407.3
27.6
$ 726.5
83.4
$ 999.0
36.6
$ 532.6
28.4
$ 406.9
18.2
$ 54.5
17.7
$ 507.1
$ 176.3
48.0
$1,034.1
$ 203.1
40.0
$1,278.7
$ 138.3
34.1
$ 733.3
$ 139.4
67.4
$ 632.0
Sources: S&P Capital IQ and Standard & Poor’s Global Fixed Income Research
* Debt maturing on May 29, 2012, through Dec. 31, 2012. Data as of May 28, 2012.
Includes bonds, loans, and revolving credit facilities
Note: Details may not sum to total due to rounding
Studies for emerging markets and other developed markets, including Asia,
Australia, Canada, Japan, and New Zealand, were not available at the time the
2012 Investor Fact Book was issued. These markets represent approximately
15% of the global corporate debt market
8
94%
95%
‘08
‘09
90%
875
1,000
(dollars in billions)
94%
McGraw-Hill
Rated Volume
# of Rated Issues
‘07
‘10
88%
‘11
$3,072 $2,885 $1,413 $1,439 $1,234 $1,046
$3,331 $3,076 $1,508 $1,522 $1,376 $1,188
15,510 14,488 10,367 11,616 14,194 10,404
Source: Thomson Reuters, Harrison Scott Publications, Standard & Poor's
McGraw-HIll Financial
Corporates (c)
Commercial Mortgage-Backed Securities (CMBS) (b)
S&P penetration rate as a % of rated dollar volume
S&P penetration rate as a % of rated dollar volume
$1,500
$300
1,125
225
96%
94%
750
96%
82%
99%
95%
97%
‘06
Rated Volume
# of Rated Issues
150
‘07
$924 $1,062
$979 $1,110
2,102 1,858
‘08
‘09
‘10
‘11
$746
$779
889
$853
$861
1,057
$664
$697
1,300
$660
$679
1,109
S&P Rated Volume
Rated Volume
# of Rated Issues
‘06
‘07
$184
$225
151
$210
$240
120
$15
$16
13
Source: Thomson Reuters, Standard & Poor’s
Source: Harrison Scott Publications, Standard & Poor’s
Municipals (a)
Asset-Backed Securities (ABS) (b,e)
S&P penetration rate as a % of rated dollar volume
S&P penetration rate as a % of rated dollar volume
$300
$500
375
84%
85%
88%
91%
98%
89%
$3
$7
25
Rated Volume
# of Rated Issues
‘06
‘07
$321
$381
10,137
$371
$438
10,056
‘08
‘09
‘10
$370
$410
$416
$421
$450
$468
9,022 10,189 12,353
‘11
$273
$312
8,899
S&P Rated Volume
Rated Volume
# of Rated Issues
‘07
‘08
‘09
‘10
‘11
$279
$284
393
$222
$227
243
$124
$144
186
$100
$130
243
$79
$125
233
Residential Mortgage-Backed Securities (RMBS) (b, d)
Collateralized Debt Obligations (CDOs) (b)
S&P penetration rate as a % of rated dollar volume
S&P penetration rate as a % of rated dollar volume
1,125
95%
375
‘06
S&P Rated Volume
Rated Volume
# of Rated Issues
$1,060
$1,151
1,854
98%
98%
255
92%
750
63%
$264
$270
433
Source: Harrison Scott Publications, Standard & Poor's
$340
77%
‘06
Source: Thomson Reuters, Standard & Poor’s
$1,500
$7
$32
37
150
86%
S&P Rated Volume
$7
$18
41
23%
‘11
98%
75
125
40%
‘10
98%
225
87%
250
44%
‘09
93%
‘08
75
375
S&P Rated Volume
88%
‘07
$641
$676
1,134
170
85%
‘08
$27
$32
101
85%
‘09
$45
$53
135
57%
‘10
$19
$33
130
21%
‘11
$3
$15
48
Source: Harrison Scott Publications, Standard & Poor’s
97%
‘08
85
S&P Rated Volume
Rated Volume
# of Rated Issues
‘06
‘07
$319
$325
833
$321
$328
927
$33
$34
99
63%
‘09
$4
$6
24
97%
‘10
$29
$30
127
93%
‘11
$24
$26
78
Source: Harrison Scott Publications, Standard & Poor's
Notes for debt issuance:
(a) Excludes municipal student loans and private placements
(b) Excludes confidential transactions
(c) Includes industrial and financial services issuers. Also includes Rule 144a (private
placements), MTN takedowns, convertibles, and preferred stocks. Excludes sovereign
issuers, private placements (except Rule 144a issues), retail notes, commercial paper,
and all agency issues
(d) Excludes agency deals. Includes home equity loans
(e) Excludes asset-backed commercial paper and letters of credit
2012 Investor Fact Book
9
STANDARD & POOR’S RATINGS SERVICES
Global Debt Markets (continued)
European Region Debt Market
In 2011, Standard & Poor’s rated approximately 69%
of the $1.6 trillion of addressable debt issued in the
European market, which includes the Middle East
and Africa, compared to 83% in 2010. Overall, rated
debt issuance by dollar volume in the region grew
approximately 11% from 2010 to 2011, while the
number of issues grew by 8%.
The rated debt market is a component of the total
debt market and includes only the debt securities
issued with a rating. The rated European debt market
chart (shown below) is comprised of five new-issue
categories: (1) Corporates; (2) Mortgage-Backed
Securities (Residential Mortgage-Backed Securities
and Commercial Mortgage-Backed Securities);
(3) Asset-Backed Securities; (4) Collateralized Debt
Obligations; and (5) Covered Bonds.
European Corporates (b,e)
S&P penetration rate as a % of rated dollar volume
$1,500
93%
1,125
83%
87%
750
91%
90%
90%
375
‘06
S&P Rated Volume
Rated Volume
# of Rated Issues
‘07
$ 965 $ 941
$1,165 $1,084
3,305 2,998
‘08
‘09
$873 $1,354
$962 $1,453
1,988 1,967
‘10
‘11
$835
$926
2,199
$762
$845
1,862
Source: Thomson Reuters, Standard & Poor’s
(annual figures; dollar volume in billions; data by domicile of issuer/assets)
Rated European Debt Market (a,e)
European Residential Mortgage-Backed Securities (RMBS) (a,d,e)
S&P penetration rate as a % of rated dollar volume
S&P penetration rate as a % of rated dollar volume
$400
$2,500
1,875
83%
300
82%
89%
1,250
83%
83%
69%
‘10
‘11
‘06
Rated Volume
# of Rated Issues
62%
52%
‘08
74%
‘09
74%
75%
‘10
‘11
$ 74
$101
48
$89
$119
46
100
625
S&P Rated Volume
83%
200
‘07
‘08
‘09
$1,593 $1,790 $1,224 $1,547 $1,222 $1,137
$1,920 $2,184 $1,469 $1,736 $1,478 $1,636
4,727 4,512 2,694 2,359 2,886 3,212
Source: Thomson Reuters, Harrison Scott Publications, Standard & Poor's
S&P Rated Volume
Rated Volume
# of Rated Issues
‘06
‘07
$273
$328
255
$246
$399
210
$32
$62
64
$ 8
$11
7
Source: Harrison Scott Publications, Standard & Poor’s
European Commercial Mortgage-Backed Securities (CMBS) (a,e)
S&P penetration rate as a % of rated dollar volume
$100
75
94%
85%
50
25
‘06
S&P Rated Volume
Rated Volume
# of Rated Issues
$76
$81
85
‘07
70%
72%
42%
42%
‘08
‘09
‘10
‘11
$55
$65
59
Source: Harrison Scott Publications, Standard & Poor’s
10
McGraw-Hill
$1
$2
7
$2
$2
6
$3
$6
10
$2
$4
3
McGraw-HIll Financial
Asia-Pacific Region Debt Market
European Asset-Backed Securities (ABS) (a,c,e)
S&P penetration rate as a % of rated dollar volume
$140
105
81%
79%
70
68%
Rated Volume
# of Rated Issues
52%
54%
‘09
35
S&P Rated Volume
63%
In 2011, rated debt issue volume for corporates in
Asia was $224 billion, down 6% from 2010. Standard
& Poor’s 2011 market penetration was 82% for
corporates, compared to 83% in 2010. For structured
finance, rated issuance was up 48% from 2010,
and Standard & Poor’s rated approximately 69% of
that volume, down from 78% in 2010.
‘06
‘07
$ 98
$122
209
$ 90
$113
165
‘08
$22
$33
106
‘10
$10
$15
42
$20
$38
92
‘11
$27
$49
93
Source: Harrison Scott Publications, Standard & Poor's
European Collateralized Debt Obligations (CDOs) (a,e)
Asian Corporates (b)
S&P penetration rate as a % of rated dollar volume
S&P penetration rate as a % of rated dollar volume
$300
$160
120
80
75%
150
69%
40
S&P Rated Volume
Rated Volume
# of Rated Issues
‘06
‘07
$ 94
$126
808
$110
$137
596
87%
225
81%
‘08
$25
$36
106
65%
90%
73%
‘09
‘10
‘11
$1
$2
9
$6
$7
35
$3
$4
17
86%
83%
S&P Rated Volume
Rated Volume
# of Rated Issues
‘06
‘07
‘08
‘09
‘10
‘11
$177
$205
839
$147
$178
1,008
$162
$206
880
$237
$274
841
$196
$237
797
$182
$224
694
Source: Thomson Reuters, Standard & Poor’s
European Covered Bonds (CB) (a,e)
Asian Structured Finance (a,c,d)
S&P penetration rate as a % of rated dollar volume
S&P penetration rate as a % of rated dollar volume
$700
$200
525
150
72%
175
S&P Rated Volume
Rated Volume
# of Rated Issues
88%
‘06
$87
$99
65
83%
80%
60%
72%
78%
‘06
‘07
‘08
‘09
‘10
$139
$167
461
$105
$131
497
100
90%
‘07
‘08
$348
$386
484
$270
$374
423
Source: Harrison Scott Publications, Standard & Poor’s
68%
‘09
$172
$252
328
71%
41%
‘10
‘11
$284
$400
602
$254
$614
1,191
82%
75
Source: Harrison Scott Publications, Standard & Poor's
350
83%
79%
69%
50
S&P Rated Volume
Rated Volume
# of Rated Issues
$45
$75
342
$43
$59
226
$49
$62
205
‘11
$63
$92
238
Source: Harrison Scott Publications, Standard & Poor's
Notes for debt issuance:
(a) Excludes confidential and repo transactions
(b) Includes industrial and financial services issuers. Also includes Rule 144a (private
placements), MTN takedowns, convertibles, and preferred stocks. Excludes sovereign
issuers, private placements (except Rule 144a issues), retail notes, commercial paper,
and all agency issues
(c) Excludes asset-backed commercial paper and letters of credit
(d) Includes home equity loans
(e) European data includes Middle East and Africa regions
2012 Investor Fact Book
11
STANDARD & POOR’S RATINGS SERVICES
Ratings Diversification
Ratings
Standard & Poor’s Ratings Services continues to diversify
its business geographically and beyond new bond ratings.
Product expansion has reduced Standard & Poor’s
reliance on bond issuance or interest-rate sensitive
businesses. Geographic expansion has increased
revenue from outside the United States (local and
cross-border debt markets).
Financial Strength, Counterparty, and Corporate Credit Ratings: An
opinion of an entity’s overall creditworthiness and capacity to pay its
financial obligations. These ratings do not apply to specific financial
obligations.
Bank Loan Ratings: An evaluation of a syndicated loan based on the
likelihood of ultimate repayment of the loan and on the recovery value
in the event of default.
Recovery Assessments: A stand-alone, transparent opinion of the likely
recovery of a loan in the event of default; expressed on a numerical
scale—not linked to or limited by the issuer’s traditional corporate
credit rating. Recovery assessments cover secured and unsecured debt.
Financial Strength Ratings(1)
Counterparty Ratings(2)
Corporate Credit Ratings(3)
Total Outstanding Ratings
Number of Ratings Outstanding at Year-End
Total Outstanding Ratings
2,500
320
320
1,875
240
240
1,250
160
160
625
80
‘06
Ratings 1,924
‘07
‘08
‘09
‘10
‘11
1,972
2,080
2,093
2,087
2,107
80
‘06
‘07
‘08
‘09
‘10
‘11
‘06
‘07
‘08
‘09
‘10
‘11
Ratings 283
284
289
295
297
299
Ratings 228
239
242
231
239
246
(1) Formerly Claims-Paying Ability Ratings
(2) Total for those organizations whose only rating is a
Counterparty Rating
Global Bank Loan Ratings
Recovery Assessments
Number of Ratings Outstanding at Year-End
Distribution of All Recovery Assessments As of May 23, 2012
3,000
1,800
2,250
1,350
1,500
900
450
750
‘06
U.S.
‘07
‘08
‘09
‘10
‘11
1,481 1,357 2,105 2,101 1,845 2,017
Europe
Rest
Total
291
274
385
456
393
442
182
218
297
416
326
298
1,954 1,849 2,787 2,973 2,564 2,757
%
0.05 15.92 16.59 27.76 17.93 8.78 12.97
Rating
1+
1
2
3
4
5
6
Unsecured/Subordinated Recovery Assessments
Secured Recovery Assessments
Evaluations
(3) Total for those organizations whose only rating is a
Corporate Credit Rating
Standard & Poor’s Recovery
Assessments and Descriptions
1+
Highest expectation
of full recovery
1
Very high recovery
2
Substantial recovery
3
Meaningful recovery
4
Average recovery
5
Modest recovery
6
Negligible recovery
Recovery
Expectations*
100%**
90-100%
70-90%
50-70%
30-50%
10-30%
0-10%
* Recovery of principal plus accrued, but unpaid, interest
at the time of default
** Very high confidence of full recovery resulting from significant overcollateralization or strong structural features
Source: Standard & Poor’s
Sovereign Ratings
Rating Evaluation Service: A confidential,
indicative assessment of how potential
acquisitions, debt issues, stock repurchases,
recapitalizations, consolidations, and other
actions may impact a company’s creditworthiness and credit rating.
Servicer Evaluations: An independent,
objective view of a company’s operational
capability to service loan and asset portfolios. The Servicer Evaluation rankings serve
as consistent, objective benchmarks for
assessing operational risk that provide valuable transparency and enable global market
participants to make informed decisions.
Standard & Poor’s is a global leader in providing ratings and creditrelated services for sovereign, sovereign-supported entities, and
supranational issuers. Public sector coverage extends to local and
regional governments, as well as to the healthcare, higher education,
and housing sectors around the world. Standard & Poor’s network of
offices around the globe enables its regionally-based analysts to gain
valuable local insights into the governments and issuers they rate.
Rating Evaluation Service
Servicer Evaluations
Sovereign Ratings
Evaluations
Evaluations
Ratings
400
500
160
300
375
120
200
250
80
125
100
Eval.
‘06
‘07
‘08
‘09
‘10
‘11
220
270
210
220
289
296
‘07
‘08
‘09
‘10
‘11
‘06
‘07
‘08
‘09
‘10
‘11
379
420
438
386
378
382
Ratings 114
117
123
124
124
127
Source: Standard & Poor's
Source: Standard & Poor's
12
Eval.
40
‘06
McGraw-Hill
Source: Standard & Poor's
McGraw-HIll Financial
S&P Capital IQ
A Scalable Business with Unique, Integrated Offerings for
Global Financial Markets
By integrating and evolving previously separate but strong and successful
business lines into one scaled operation, S&P Capital IQ can offer global
financial professionals high-value content across all asset classes. That
means looking at the business in a new way: not as a collection of single
products, but as a portfolio of capabilities—combinations that offer new and
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New Horizontal Capabilities
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S&P Credit Ratings
and Research
Global Credit Portal®
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Benchmarks
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Indices for:
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Compustat
Creating
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MarketScope®
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Customers
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2012 Investor Fact Book
13
S&P CAPITAL IQ
Integrating New Capabilities into
S&P Capital IQ’s Platform
S&P Capital IQ’s targeted acquisitions add specific capabilities
that enhance the overall platform offering. New functionality
and capabilities will bolster S&P Capital IQ’s position as
a leading provider of intelligence to financial professionals.
Over-the-Counter
Market Data
Real-Time Exchange
Content and Tools
Portfolio and Risk
Analytics
Credit Market Analysis
Limited
QuantHouse
R² Financial Technologies
S&P Capital IQ acquired QuantHouse,
an independent global provider of
market data and end-to-end systematic trading solutions, in 2012.
R² Financial Technologies is a leading
provider of advanced risk and
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pricing, hedging and capital management across asset classes. R² Financial
was acquired by S&P Capital IQ in 2012.
S&P Capital IQ acquired London-based
Credit Market Analysis Ltd., a leading
source of independent, accurate
market data in the over-the-counter
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2012 as part of the S&P Dow Jones
Indices joint venture.
Credit Market Analysis combines
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Credit Market Analysis
Limited adds the technology
for S&P Capital IQ to move
into intra-day quotes
on derivatives and other
OTC securities
The acquisition of QuantHouse will
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access to exchange pricing globally,
including securities valuations and
portfolio analytics, throughout all of
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QuantHouse offers ultra-low-latency
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QuantFactory: Alpha-generation software
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McGraw-Hill
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QuantLink: Low-latency transaction
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firms to keep up with low-latency market
demands
QuantHouse acquisition
allows S&P Capital IQ to
offer unique real-time
monitors, derived data
sets, and analytics
14
R² Financial provides practical risk
intelligence through expertise in
multi-asset class portfolio-level
analytics, complex credit and
structured product risk analytics, and
sophisticated scenario analytics.
R² Financial Technologies
acquisition provides
advanced risk and scenariobased analytics
McGraw-HIll Financial
S&P CAPITAL IQ
Enterprise Solutions
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clients’ proprietary applications. The union of this content merges global
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Global Services, Compustat, S&P Capital IQ, Equity Research, and S&P
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Reference Data & CrossReference Services
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Reference Data &
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to create a clear picture of concentration, market exposure,
and risk.
Terms &
Conditions
Real-time data for timely securities processing, reporting,
and analysis. Global coverage of more than 1.4 million
structured finance securities and more than 3 million global
corporates, governments, agencies, and U.S. municipals.
Valuations and
Pricing
Independent and transparent valuations across asset classes
for global fixed income securities. Market- and model-based
pricing that deliver a robust view of an illiquid bond’s value
by incorporating credit risk and market risk.
Ownership
Linkages and
Financial
Obligations
Comprehensive database that ties together the underlying
data revealing connections among sectors, instruments,
issuers, entities, parents, and obligors to better understand
risk exposure and potential conflicts of interests.
Credit Risk
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information to assess creditworthiness and relative value.
Analytics content includes S&P Market-Derived Signals,
Probability of Defaults, and Risk-to-Price.
Corporate Actions
Critical information for the effective administration of global
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Company
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ownership, and professionals data sets for detailed company
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complex investment back-testing models, and assess risk.
Equity and Credit
Research
A comprehensive source of differentiated multi-asset class
global research, analysis, strategies, and services for
institutional investors and all levels of wealth management
institutions as well as financial advisors.
2012 Investor Fact Book
15
S&P CAPITAL IQ
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Desktop Solutions
Financial
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S&P Capital IQ
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Deep Credit
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Globall Credit Portal and S&P Capital IQ Credit Analytics
y
MarketScope Advisor
Wealth Management
Solutions
S&P Capital IQ for
Wealth Management
Institutional Investor
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Money Market Directories
M
e
S&P Capital IQ Platform
The S&P Capital IQ Platform integrates information on both public and
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Financials and Valuation:
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Qualitative Data: Company
and people intelligence, key
developments, private equity
data, executive compensation, and corporate actions
Transaction Data: Global
coverage of M&A, equity and
fixed income offerings, private
placements, buybacks, and
bankruptcies
Global Market Data:
Macroeconomic data and
Global Industry Classification
Standard (GICS®), an
enhanced industry classification system jointly developed
by Standard & Poor’s and
MSCI Barra in 1999
Sell-Side Research &
Estimates: Corporate
earnings estimates for 18,000
active companies and historical
coverage for 40,000 active/
inactive firms, Intelligent
Estimates (quantitatively
forecasted corporate earnings),
broker and sell-side research,
and aftermarket research
S&P Capital IQ was
awarded “M&A Product/
Service Provider of
the Year” in 2011 by
The M&A Advisor
Fixed Income: Fixed income
information and debt capital
structure data
Alpha & Risk Models: Stock
selection models and equity
risk models
News, Transcripts, Events,
and Mobile Applications
Ownership and Investor
Activism
www. capitaliq.com
Global Credit Portal®
Global Credit Portal brings together fundamental data, market-driven measures,
and unique research to support efficient credit and market risk-driven analysis and
alpha discovery. Offerings on the Global Credit Portal include Standard & Poor’s
Ratings Services’ credit ratings, research, credit-adjusted financials, and default and
recovery analysis as well as S&P Capital IQ’s credit model scores, probability of
defaults, peer rankings, indices, valuations, and market reference data.
16
RatingsDirect®
Credit Health Panel
Access actionable market
intelligence and risk
analytics based on Standard
& Poor’s extensive global
credit ratings and research
Analyze the relative credit
quality of customers,
suppliers, peers, and other
groups of rated and unrated
companies with a comparison of 24 financial metrics
per company—plus an
overall company score
McGraw-Hill
CreditStats Direct®
on RatingsDirect
Assess the credit of
S&P-rated companies by
viewing Standard & Poor’s
analytical credit adjustments on 2,800 global
industrial and utilities
companies
Valuations
Obtain end-of-day pricing
opinions on more than 3
million global fixed income
instruments—from simple
to complex—provided by
S&P Securities Evaluations
www. globalcreditportal.com
McGraw-HIll Financial
S&P Capital IQ Credit Analytics
S&P Capital IQ delivers actionable information to support clients’
enterprise risk management, economic and regulatory capital
management activities, and risk pricing in one Web-based solution
that includes CreditModel, CreditPro®, and CreditSignals.
CreditPro®
CreditModel
Choose
Entity
Choose one of the
thousands of rated
and unrated
companies available
Review
Inputs
Review the
company’s financials
that have been used
to quantitatively
derive an estimate of
creditworthiness
The integration of default and
recovery tools with scoring
models produces even more
dynamic risk measures
CreditSignals
Adjust
Scenarios
Compare
Credit Scores
Evaluate
Default Rates
Adjust the financials
to see how changes
impact the estimate
Compare various
scenarios and
evaluate the firm’s
sensitivity to
different changes
Evaluate entities’
cumulative
alternative default
rates by sector and
Standard & Poor’s
credit ratings
Map
PDs to Changes
Map Probabilities of
Default to changes
MarketScope® Advisor
MarketScope Advisor provides retail wealth managers and financial advisors with the market intelligence,
up-to-the-minute news and commentary, tools, and
broad multi-asset class coverage they need to service
their clients. Soon, MarketScope Advisor Premier will
offer value-added research from the S&P Capital IQ
platform as well as the capability to load firm-wide
internal research to the platform for integrated
viewing within the MarketScope Advisor Platform.
www. advisorinsight.com
S&P Capital IQ for
Wealth Management
S&P Capital IQ for Wealth Management provides
private wealth managers with the most comprehensive investment research, leading-edge market
monitoring tools, and institutional-level content to
help them grow and nurture their business.
Money Market Directories
Money Market Directories is a leading global resource
for institutional investor intelligence, and provides
up-to-date information on 375,000 key decision
makers from more than 100 countries.
86,000 pension plans, endowments,
and foundations
27,000 investment management and
advisory firms
4,700 family offices and their service providers
2,000 investment consultant branches
www. mmdwebaccess.com
2012 Investor Fact Book
17
S&P CAPITAL IQ
Research & Analytics
S&P Capital IQ Equity Research
had 6 winners in The Wall Street
Journal’s 2012 “Best on the Street”
Analysts Survey
S&P Capital IQ is a comprehensive source of differentiated
cross-asset, cross-market analytics; market commentary and
strategies; company research; and non-discretionary advice
for financial professionals.
Multi-Asset Class Research and Analysis
S&P Capital IQ’s multi-asset class research and
analysis is provided by analysts who bring the
highest standards of integrity, objectivity, and rigor
to their work. The research and analysis includes
qualitative and quantitative models that cover:
Stocks: More than 1,900 stocks covered
qualitatively and 8,200 stocks covered
quantitatively across the world
Exchange-Traded Funds (ETFs): ETF
holdings-based analysis reports on more than
600 ETFs with an overweight, market weight,
or underweight recommendation
Mutual Funds: Provides rankings, commentary,
and analysis on more than 19,000 mutual funds
Bonds: Portal includes research, tools, and a
bond ladder builder covering more than
200,000 issues from more than 40,000 issuers
Options: Based on stock coverage of 1,200
U.S. stocks and ADRs, S&P Capital IQ offers
covered calls and calendar spreads
Non-Discretionary Advisory Services
Global Markets Intelligence (GMI) is S&P Capital IQ’s
advisory business.* It provides risk-based non-discretionary equity and fixed income portfolio strategies, asset allocation, and fund review services to
asset managers. Global Markets Intelligence is
supported by S&P Capital IQ’s broad, proprietary
offering of data, analytics and research.
GMI’s Competitive Advantage Equity Strategy
ranks in the top 2% for three-year returns in
the Lipper Large Cap Core Equity universe as
of June 30, 2012
GMI builds methodologies with risk mitigation
components at their core, not as a separate overlay,
to generate superior risk-adjusted returns.
GMI’s multi-manager strategies use asset
allocation and fund recommendations, which
can be customized to a client’s available funds
and designated asset classes
GMI’s Balanced Credit Model Portfolio utilizes
a proprietary strategy that measures how
corporate bonds compensate holders for
market and credit risks
Global Markets
Intelligence
currently advises
on more than
$18 billion in
total assets
Improving Investor-Level Transparency with Market Reports
S&P Capital IQ’s Global Market
Intelligence creates cross-asset class
perspectives and innovative ways to
leverage credit and risk intelligence
through market reports.
Consensus Earnings Report
Report provides detailed and consensus global
estimates data, with over 40 data measures,
including EPS, Revenue, Net Income, EBITDA,
and EBT
Lookout Report
A bi-weekly compendium from S&P Capital IQ
and S&P Dow Jones Indices that provides
current data and forward-looking perspectives
and insights on contemporary issues
Commentary
Leveraged Commentary & Data (LCD) is the preeminent provider of leveraged finance news and analysis.
LCD’s team of experienced analysts and reporters
uses its proprietary database along with conversations
with buy-side and sell-side professionals to present
unique market perspectives on current events.
LCD’s coverage of the leveraged
finance market includes:
Real-time news
Daily and weekly commentary that puts news
into perspective
Leveraged loan returns for the U.S. and Europe
LCD’s proprietary database
is the only industry-wide
repository of leveraged loan
memoranda
Current market technicals and analytics
www. lcdcomps.com
* S&P Capital IQ Global Markets Intelligence is a completely non-discretionary advisory business. GMI does not administrate or custody customer securities, invest, nor engage in securities transactions in any form. GMI is analytically
and editorially independent from any other analytical group at Standard & Poor’s
18
McGraw-Hill
LCD has 9,000 LinkedIn group members;
2,300 Twitter followers; 2,500 Facebook
“Likes”; and 24,000 YouTube views
McGraw-HIll Financial
S&P Dow Jones Indices
More than $6 trillion*
was directly benchmarked
to S&P Dow Jones Indices’
family of indices
The S&P Dow Jones Indices joint venture was formed in
June 2012 and combines S&P Indices and Dow Jones Indexes
to create one of the world’s largest providers of financial
market indices.
Ownership of S&P Dow Jones
Indices Joint Venture
• McGraw-Hill contributed its S&P Indices business, a leading
provider of equity, commodity, real-estate, and strategy indices
• CME Group/Dow Jones joint venture contributed its Dow Jones
Indexes business, recognized for its strength in equity, commodity, emerging market, target date, and dividend indices
McGraw-Hill 73.0%
With a long track record of providing investors with innovative, index-based
solutions, original research and timely data, S&P Dow Jones Indices is
now home to the Dow Jones Industrial AverageSM and S&P 500®, as well
as the S&P/Case-Shiller® Home Price Indices, S&P GSCI® and the Dow
Jones-UBS Commodity IndexSM.
(1)
CME Group 24.4%
Dow Jones &
Company, Inc.(2) 2.6%
New Licensing Agreement
(1) Ownership through its affiliates
(2) Indirect ownership
The joint venture’s new license agreement changes S&P Indices’ financial
relationship with the CME—from a transactional, fee-per-trade model to
a profit-sharing model tied to the financial performance of the CME’s
overall trading and clearing business for equity-based futures, swaps, and
options on futures based on S&P Dow Jones Indices. The CME Group will
have a long term, ownership-linked, exclusive license to list futures and
options on futures based on certain S&P Dow Jones Indices.
S&P Dow Jones
Indices*
Calculates more than
830,000 indices
Enhanced Platform for Growth and Innovation
Publishes benchmarks
that provide the basis for
542 ETFs globally
The combination broadens a successful partnership between McGrawHill and the CME Group that began 30 years ago with the joint creation
of the S&P 500 Futures contract. Subsequently, numerous innovative
products were launched, including the S&P 500 E-mini—the most-traded
equity index futures contract in the world.
* Historical figures from S&P Indices and Dow Jones
Indexes are as of December 31, 2011 and have been
combined for illustration purposes only; not intended
to represent what the figures would have been had the
joint venture already been launched
www. spdji.com
S&P Dow Jones Indices will target growth through international and
asset-class expansion, new product development, enhanced market data
offerings, and cross-selling opportunities. The joint venture will help
advance international growth by building on relationships already established by the CME Group with some of the largest derivative exchanges
throughout the world. Partners’ exchange relationships and the CME
Globex platform provide global distribution and linkage to fast-growing
emerging markets.
Exchange Relationships Around the World
Moscow Exchange MICEX-RTS
CBOE
Chicago Board of Options Exchange
TMX Group
Korean Exchange Tokyo Stock Exchange
DME
BMV
Dubai Mercantile Exchange
Bolsa Mexicana de Valores
TSE
KRX
NSE
National Stock Exchange of India
HKE
OSE
Osaka Securities Exchange
Hong Kong Exchanges and Clearing Ltd
Bursa Malaysia
SGX
MILA
BM&F BOVESPA
Mercado Integrado Latinoamericano
S&P Dow Jones Indices
JSE
Johannesburg Stock Exchange
Singapore Exchange
ASX
Australian Securities Exchange
CME Group
2012 Investor Fact Book
19
S&P DOW JONES INDICES
Benchmarks
The S&P 500® is the
world’s most followed
stock market index with
$1.45 trillion* directly
indexed to it
S&P Dow Jones Indices, the world’s leading index provider, maintains a wide
variety of investable and benchmark indices to meet an array of investor needs.
Its family of indices includes the S&P 500; the Dow Jones Industrial Average;
the S&P/Case-Shiller(1) Home Price Indices, the leading measure of U.S. home
prices; the S&P Global BMI, an index tracking approximately 11,000 constituent
companies; the S&P GSCI® and the DJ-UBS Commodity Index, two of the
industry’s leading commodities measures; and the S&P National AMT-Free
Municipal Bond Index, the premier investable index for U.S. municipal bonds.
S&P Dow Jones Indices span asset classes, investment strategies, and geographic markets
Equity
Fixed Income
Commodities
Economic
Thematic
Strategy
Custom
Families of indices
for global and local
markets, covering
approximately 11,000
securities in more
than 80 countries
with over 20 years of
uninterrupted history.
Broad market benchmarks measuring
exposure to liquid
fixed income asset
classes as well as
less observable segments of the credit
market.
The S&P GSCI and
the DJ-UBS Commodity Index are
widely recognized as
leading commodity
market measures.
Indices providing
liquid exposure to
investment themes
that cut across
traditional industry
definitions.
Indexing strategies
across asset classes
and investment
themes.
Global/Regional
U.S. Municipals
S&P GSCI
Leading monthly
measures that track
changes in the value
of U.S. residential
real estate, default
rates in consumer
credit, and the principal cost components
of the U.S. healthcare
industry.
Sectors
Credit Default Swaps
Leveraged Loans
S&P/Case-Shiller
Home Price
Energy
Risk Control
Capitalization
S&P World Commodity Index (WCI)
Indices customdesigned by derivative and structured
product providers,
ETF providers,
exchanges, asset
managers and
pension plans and
calculated by S&P
Dow Jones Indices.
Clients include:
Inverse and Leverage
BNP Paribas
Growth & Value
Money Markets
S&P Strategic Futures
S&P/Experian Consumer Credit Default
Asset Allocation
Credit Suisse
Quantitative Strategies
First Trust
Target Date
Goldman Sachs
Dow Jones-UBS
Commodity Index
U.S. Treasuries
Global Fixed Income
Green Investing
Infrastructure
Natural Resources
Commodity Producers
Luxury
S&P Healthcare
Economic Indices
Alternatives
Dividends
Currency
Fund-Based
Lyxor
China and Australia
Bond Markets
SGI
Sukuk
* As of December 31, 2011
(1) Case-Shiller® and Case-Shiller Indexes® are registered trademarks of Fiserv, Inc.
Launching Innovative Indices
S&P GIVI™ (S&P Global Intrinsic Value Index)
Award-Winning Indices
S&P GIVI provides investors with an alternatively weighted,
low-volatility exposure to global equity markets. Alternatives to traditional market cap weighting are becoming
increasingly important as investors look beyond classic
market beta for factors that influence performance and risk.
S&P GIVI combines exposure to two such factors—low
volatility and intrinsic value—into one unique index.
S&P Dow Jones Indices has been
recognized with multiple industry
awards in 2011 and 2012, including:
®
The S&P 500 Low Volatility Index
The S&P 500 Low Volatility Index measures the performance of the 100 least volatile stocks in the S&P 500. The
index is designed to serve as a benchmark for low volatility
or low-variance strategies in the U.S. stock market.
Constituents are weighted relative to the inverse of their
corresponding volatility, with the least volatile stocks
receiving the highest weights.
The S&P/ASX Australian Fixed
Interest Series
The S&P/ASX Australian Fixed Interest Index Series is a
broad benchmark family designed to measure the performance of the Australian bond market meeting specific
investment criteria. The series is designed for use by
institutional investment managers, managed and superannuation funds, and professional advisors.
20
McGraw-Hill
“Most Innovative Index Provider of the
Year”—Structured Products Magazine Asia
and Americas
“Best Index Provider in Asia”—Asia Asset
Management
“Most Innovative ETF Index Provider in
the Americas” and “Most Recognized ETF
Brand in the Americas (for SPDR)”—
ExchangeTradedFunds.com
“Acquisition of the Year”—Inside Market Data
How S&P Dow Jones
Indices Generate
Revenue
Investment vehicles such as ETFs,
which are based on S&P Dow
Jones Indices and generate
revenue through fees based on
assets in underlying funds
Index-related licensing fees, which
are either annual fees based on
assets under management or flat
fees for over-the-counter (OTC)
derivatives and retail-structured
products
Data subscriptions, which support
index fund management, portfolio
analytics, and research
Listed derivatives, which
generate royalties based on
trading volumes of derivatives
contracts listed on the Chicago
Mercantile Exchange, Chicago
Board Options Exchange,
Australian Securities Exchange,
Montreal Exchange, and National
Stock Exchange of India
McGraw-HIll Financial
Record-Level ETFs Linked to
S&P Dow Jones Indices
ETFs Based on S&P Dow Jones Indices (as of July 31, 2012)
Exchange-traded funds (ETFs)—which
represent share ownership of an index fund
but trade like shares of stocks—have become
some of the most actively traded securities
on stock markets around the world.
Assets Under Management: $421 billion
(in billions)
Number of ETFs
S&P Indices $359
12/31/11
07/31/12
S&P Indices
378
432
Dow Jones Indexes
164
174
Total
542
606
Dow Jones
Indexes $62
S&P Indices was at the forefront of ETF development
when the very first ETF—the S&P 500 SPDR
(Standard & Poor’s Depositary Receipts)—launched
in 1993. Today, S&P Dow Jones Indices serves
as the basis for ETFs, futures, options, and other
investable products around the world.
S&P Index-Based Global ETF Assets
SPDR Trust Value/Average Daily Trading Volume
(dollars in billions)
(dollars in billions) (shares in thousands)
$320
$120
400,000
240
90
300,000
160
60
200,000
Dollars
100,000
30
80
‘00
‘01
‘02
$38.2
$49.0
$63.2
‘03
‘04
‘06
‘05
‘07
‘08
‘09
‘10
‘00
‘11
$79.8 $113.7 $135.1 $161.2 $235.3 $203.6 $247.0 $300.3 $313.7
Dollars $25.5
‘01
‘02
‘03
‘04
‘05
$30.4 $39.3 $43.1 $54.8 $59.5
‘06
‘07
‘08
‘09
‘10
$64.1 $100.1 $93.9 $84.9 $89.9
‘11
$95.4
Shares 7,671 13,803 33,881 41,121 42,965 61,673 70,105 156,073 301,627 247,061 210,232 218,228
Source: Standard & Poor's (2000-2005); Bloomberg (2006-2011)
Source: American Stock Exchange (2000-2008); Bloomberg (2009-2011)
SPDR Dow Jones Industrial Average ETF Trust Value/Average
Daily Trading Volume (dollars in billions) (shares in thousands)
Select Sector SPDR Trust Value/Average Daily Trading Volume*
(dollars in billions) (shares in thousands)
$16
24,000
$48
280,000
12
18,000
36
210,000
8
12,000
24
140,000
6,000
12
4
‘00
Dollars $1.9
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
‘09
‘10
$3.0
$4.7
$6.8
$8.0
$7.6
$6.7
$8.6
$9.0
$9.0
‘00
‘01
70,000
‘02
‘11
‘05
‘06
‘07
‘03
‘04
‘08
$6.2
$9.4 $12.8 $17.7 $26.5 $23.1 $31.4 $40.1 $44.0
$8.7 $10.8
Dollars $2.4
Shares 1,394 3,529 7,893 7,210 6,683 6,702 7,228 13,518 23,985 17,157 9,652 8,747
Shares 2,185
Source: Bloomberg
Source: American Stock Exchange (2000-2008); Bloomberg (2009-2011)
* Select Sector SPDRs started trading December 22, 1998
$3.6
$3.3
2,690 5,200
S&P 500 Option Contracts Traded on the CBOE
(contracts in millions)
(contracts in millions)
‘08
‘11
‘09
525
‘02
175
‘00
‘03
‘04
‘05
200
150
100
‘06
50
‘01
Futures 22.5
22.5
23.7
20.2
16.1
15.4
14.8
15.8
16.8
10.4
7.7
7.3
E-mini
39.4
115.7
161.2
167.2
207.1
257.9
415.3
633.9
556.3
555.3
621.5
19.2
‘11
‘10
‘07
350
‘10
5,201 9,800 30,460 45,208 91,163 260,952 233,390 183,918 195,806
S&P 500 Futures and "E-mini 500"* Contracts Traded on the CME
700
‘09
Options
‘00
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
‘09
‘10
‘11
22.0
22.8
29.9
36.7
49.5
71.8
104.3
158.1
178.6
154.9
175.3
197.1
Source: Chicago Board Options Exchange
Source: Chicago Mercantile Exchange
* E-mini 500 contracts started trading on September 9, 1997
2012 Investor Fact Book
21
COMMODITIES
Platts
Meeting the Information Needs of the Global Energy,
Petrochemicals, and Metals Markets
Platts is a leading global provider of energy, petrochemicals,
and metals information. Its products and services enable
thousands of traders, risk managers, analysts, and industry
leaders in more than 150 countries to make informed and
up-to-the-minute trading and investment decisions. An independent provider, Platts has been a respected source for
actionable information and global benchmarks for more than
a century.
More than 12,000 price assessments, references, and indexes
are produced daily and disseminated to subscribers through Platts’
newsletters, real-time alerts, and market data services. With its
finger on the pulse of the many commodity markets central to
economic development, Platts is positioned to benefit from heightened demand for its services in promising and challenging economies
and markets throughout the world.
Embedded in the Industry’s Workflows
The strength of Platts’ market information has resulted in customers
embedding its information directly into their end-to-end workflows.
This enables customers to identify opportunities to profit from market
movements and better manage their risk.
COMMODITIES AND TRADING WORKFLOW
Develop Trading
Strategy
Platts is a leading source of price
assessments in the physical and
financial commodities markets
Platts’ Industry
Coverage
Oil
Petrochemicals
Natural Gas
Electricity
Coal
Nuclear
Freight
Base Metals
Steel
Bio Fuels
Agriculture
2011 Revenue
$419 million
Platts is
McGraw-Hill’s
most global
business with
almost two-thirds
of its revenue
coming from
outside the U.S.
For many commodities, Platts’
price assessments are considered
“benchmarks” for establishing prices
in contracts and monitoring risk
Find Trading
Partners
Execute
Trades
Settle
Trades
Develop Risk
Hedging Strategies
Analyze Finance
Markets
PLATTS’ PRICE ASSESSMENTS are used as benchmarks in the commodities and trading workflow
RISK MANAGEMENT WORKFLOW
Manage Trading
Compliance
Manage Price,
Asset, and Credit Risk
PLATTS’ FORWARD CURVES support the risk management workflow
Platts’ Methodology:
Assessing the Market Value of Commodities
Platts’ Market-on-Close (MOC) price assessment process is used
globally for Platts’ petroleum-related assessments. The MOC price
assessment process identifies bids, offers, and transactions by company
of origin, making it the most transparent view of price discovery
available in the markets. The MOC methodology yields an end-of-day
trading value which facilitates cross-commodity comparisons and
mark-to-market accounting.
Platts eWindow is an online communication tool that enables MOC
participants to instantly communicate bids, offers, and other deal
information electronically to Platts’ editors and other market participants simultaneously, and to view market activity ‘live’ as it happens.
How Markets Use Platts’
Price Assessments
Platts’ price assessments are the
basis for billions of dollars of
transactions annually in the physical
and futures markets:
Buyers, sellers, and traders use them as a
basis for pricing spot transactions and term
contracts
Risk managers use them to settle contracts
and to place a market value on the product(s)
they hold
Analysts use them to identify trends and
patterns in supply and demand
Governments reference them to formulate
royalty payments and retail prices
Exchanges and investors use them to price
over-the-counter derivatives contracts
22
McGraw-Hill
McGraw-HIll Financial
Platts Innovates to Help Emerging and
Established Markets Evolve
As the world’s diverse energy markets took shape over the last 100
years, Platts’ innovations in price discovery and information delivery
have provided solutions to pricing challenges and helped build Platts’
reputation as a leading provider of energy price information. Today,
many of Platts’ price assessments are considered global benchmarks.
Exchange Partners
Platts’ data have been licensed
to exchanges and other entities
for trading and clearing purposes,
including:
As the energy markets continue to evolve, Platts is leading the way
by helping clients understand and respond strategically:
Intercontinental Exchange
New Price Assessments for New Markets
Ensuring Liquidity in Oil Markets
Singapore Exchange
Platts is developing new price
assessments to keep pace with
changes in the North American
market:
Platts has introduced innovative
methodology enhancements to
address pricing challenges related
to market liquidity:
Tokyo Commodity Exchange
Extensive exploration and production activity
in new various crude oil shale “plays” such
as Eagle Ford and Bakken promise to boost
domestic crude output
Platts’ Brent price assessment is used as
a benchmark to price more than 60% of
the world’s total crude oil. By refining the
methodology for its Brent price assessment,
Platts resolved issues related to the sulfur
content and underlying liquidity of this
benchmark. This North Sea crude is fast
becoming a standard for regional pricing
in Asia-Pacific
Substantial pipeline development projects
are opening new markets for previously
landlocked American and Canadian crudes
including a Western Canadian crude blend
that is delivered from the Cushing, Oklahoma
hub to the Gulf Coast
With the shale gas boom promising to create
new markets for natural gas liquids (NGL),
Platts is monitoring developments around the
gas value chain for potential new spot price
assessments in the NGL/LPG (liquefied
petroleum gas) market
Platts’ Dubai price assessment is a leading
benchmark for Middle Eastern crude sold
into Asia. Platts enhanced the liquidity
underlying the Dubai price assessment by
incorporating the delivery of additional
crude streams
CME Group
Moscow Exchange MICEX-RTS
NASDAQ OMX
Products
& Services
Market Data
Real-Time Alerts
Newsletters
Analytics Reports
Maps &
Geospatial
Conferences
Distribution
Partners
Thomson Reuters
Bloomberg
Global View
Intercontinental
Exchange
SunGard
Morningstar
and others
Delivery
Platforms
Platts Market
Center
Platts on the Net
Platts XML Direct
CME Group and Intercontinental Exchange
list more than 600 Platts-based oil, gas,
coal, metals, and freight contracts which
have been traded more than 170 million
times in the last 12 months*
* As of June 2012
Platts’ Innovations Benefit the Steel Value Chain
As industries have moved from long-term pricing contracts to shortterm spot market pricing, the strategic $2 trillion steel market has
benefitted from Platts’ innovations. Platts addressed the metals market’s
need for pricing mechanisms by establishing price points for iron ore,
metallurgical coal, ferrous scrap, freight rates, and other commodities
that span the steel value chain.
Introducing Daily Steel Coverage
Steel-Related Price References
In 2007, Platts extended its metals coverage
into steel with the launch of Steel Markets
Daily, a newsletter which included prices for
hot-rolled coil and rebar
From 2008 through 2010, Platts introduced
more than 100 new price references for steel,
iron ore, scrap metal, manganese, coking coal,
and other raw material used in making steel
Open Market Values for Iron Ore
Advancing Platts’ Position in Metals
In 2008, Platts introduced IODEX, the world’s
first daily price assessment for seaborne iron
ore reflecting open market values
In 2011, Platts acquired the Steel Business
Briefing Group and its two divisions: Steel
Business Briefing, a leading provider of steel
news and prices, and The Steel Index, a
specialist price information service
Today, with the integration of Steel
Business Briefing’s price assessments
and The Steel Index’s price references,
Platts publishes more than 850 price
points for steel and related raw
materials which serve the information
needs of miners, steel producers, and
end-users worldwide
www. platts.com
2012 Investor Fact Book
23
COMMERCIAL MARKETS
J.D. Power and Associates
Recognizing Excellence.
Driving Results.
Companies in more than 50 countries turn to J.D. Power’s
quality and customer satisfaction research for actionable
insights to help produce better products and services.
Each year, more than 20 million survey-related communications capture
the opinions, perceptions, and expectations of consumers and business
customers. J.D. Power’s capabilities allow companies to hear the voice
of their customers and drive improvement across their entire operation:
from sales and marketing to training and service. With a rich base of
global, cross-industry knowledge and experience, J.D. Power brings a
dynamic perspective to help organizations win and keep customers.
J.D. Power is McGraw-Hill’s
largest business in China
How J.D. Power Generates Revenue
Industry Research
Practice Areas
J.D. Power Revenue
Automotive
Consumer Packaged Goods
Electronics
Energy
Financial Services
Government
Healthcare
Home Improvement
Insurance
Real Estate
Telecommunications
Travel and Leisure
Proprietary
Studies
Customized,
company-specific
research:
40% Nonautomotive
industries
30% Outside
the U.S.
Mystery shopping
Custom research
tracking programs
Social media insights
and text analytics
Syndicated
Studies
and Brand
Licensing
Business
Data and
Analysis
Tools
Independent quality
and satisfaction
studies
Subscriptions:
Industry
benchmarking
Digital experience
evaluations
Data-driven
solutions based
on point-of-sale
transactions from
the Power
Information
Network® (PIN)
Brand licensing for
award recipients
Consulting
and Training
Cross-industry,
best-practices
research
Retail performance
improvement
Customer service
and support
certification
programs
Contact center
solutions
www. jdpower.com
Driving Results
J.D. Power’s Power Information
Network (PIN) offers a suite of
solutions that helps OEMs (original
equipment manufacturers), retailers,
and financial institutions make
decisions that improve their bottom
lines by improving their understanding
of advertising effectiveness, incentive
planning, and sales trends.
PowerDealer is a PIN offering to help
automotive dealerships measure,
manage, and improve operations.
Sales, service, and financing reports
for new and used vehicles are updated
on a daily basis, allowing dealers
to benchmark their performance
against the local market and gain
competitive advantage by improving
their business operations.
Recognizing Excellence
U.S. Awards
J.D. Power is well known for establishing independent, industry-wide
benchmarks and recognizing excellence in top companies around the
world. Here is a sampling of recent
awards presented to companies
ranking highest in Quality and
Customer Satisfaction:
24
McGraw-Hill
Low-Cost Airlines:
JetBlue Airways
Credit Cards:
American Express
Full Service
Real Estate Sales:
RE/MAX
Luxury Auto Sales
Satisfaction: Lexus
Smartphones: Apple
International
Awards
Japan Mobile Phone
Service: NTT DoCoMo
China Auto Sales
Satisfaction: Audi
India Original Equipment Tires: MRF
Canada Discount
Brokerage: Disnat
China Retail Banking:
China Merchants
Bank
McGraw-HIll Financial
COMMERCIAL MARKETS
Construction
Essential Intelligence for
Building Business
www. construction.com
McGraw-Hill Construction serves more than one million
customers globally through its trends and forecasts, industry
news, and platform of construction data, benchmarks, and
analytics. Its leading brands—Dodge, Sweets, Architectural
Record, and Engineering News-Record—create opportunities
for its customers to strengthen their market position,
prioritize prospects, increase their win ratio, and target and
build relationships.
Dodge: Turning Project Data into Business Intelligence
Dodge SpecShare®
Identify Sales Opportunities
Dodge BuildShare™
Raise Customers’ Relationship IQ
Dodge BidPro™
Find and Bid Jobs
Building product manufacturers
(BPMs) use this business intelligence
platform to identify sales and marketing opportunities across the U.S.
BuildShare helps construction players
connect with owners and with each
other to target and build stronger and
more profitable relationships.
An easy-to-use dashboard alerts
contractors to all local projects, public
and private, with all the details needed
to focus on their best opportunities.
Searches more than 50,000 digitized project
plans and specifications for which brand name
and building products are being specified
Enables users to forecast market trends,
prospect target clients, evaluate the
competition, and assess potential partners
Projects are customized by trade and
location, in addition to building types
Notifies building product manufacturers of
the results so they can identify sales and
marketing opportunities at design firms,
increase their rate at which their products
are being specified in plans, and be more
competitive
http://construction.com/dodge/
dodge-business-intelligence-specshare.asp
Users receive project alerts to help manage
their best opportunities
Contractors can invite subcontractors to bid
with a special “Invitation to Bid” feature
www.construction.com/dodge/
dodge-business-intelligence-buildshare.asp
www.construction.com/dodge/
dodge-bid-pro.asp
Making Deeper Audience Connections for Industry Professionals
Industry
Customers
Owners
Architects
Engineers
Contractors
Building Product
Manufacturers
and Distributors
Increased Coverage to Meet
Reader, Advertiser Needs
Strong Online Community
for Architects
Driving Growth with Sweets’
Digital Business Model
Available in a national edition and
seven regional editions, ENR
meets the needs of readers and
better serves advertisers by giving
them more opportunities to target
and tailor their marketing messages
to specific markets. Top news from
ENR is now available via the new
ENR News mobile app.
ArchitecturalRecord.com has more
than 300,000 Twitter followers and is
the largest architectural Web site in
terms of traffic (approximately 200,000
visitors each month). The community
connects through popular destinations
including the Photo Gallery and the
Continuing Education section. Architectural Record’s Continuing Education will
reach its one millionth test taker in 2012.
Sweets is a 100% digital application
where architects come to research,
select, and specify building products.
Sweets.com enables architects to
automatically download content
directly into design software tools. Its
new mobile app enables design professionals to search and download specs,
CAD, BIM, catalogs, and data sheets.
www.enr.com
www.ArchitecturalRecord.com
http://products.construction.com
2012 Investor Fact Book
25
COMMERCIAL MARKETS
Aviation Week
Providing Essential Business Information Solutions
to Global Aerospace and Defense Professionals
Aviation Week’s
Industry Coverage
Defense, Space & Security
Commercial Aviation
Maintenance, Repair &
Overhaul (MRO)
Business Aviation
Aviation Week is a global leader in providing strategic insight
and analysis to the $2 trillion global aviation, aerospace, and
defense industries and a trusted source of intelligence for
more than 96 years.
Aviation Week’s integrated offerings deliver authoritative content, a
high-caliber audience, and a range of data, analysis, and forecasting
tools that empower aerospace and defense professionals with a strategic
business advantage that yields measurable results. The relaunched
flagship publication, Aviation Week & Space Technology, now includes
Defense Technology and MRO Editions with more content and
interactive features.
www.aviationweek.com
More Global, More Digital, More Integrated
The civil
aviation
market is
experiencing
global growth
driven by
demand
from the
Asia-Pacific
and BRIC
countries
Expanded Data Capabilities
to Enhance Analytics
Digital Media, Apps and
Mobile Content
Audience Engagement
Growing commercial fleets and aging
military aircraft will require improved
analytics to manage increased
maintenance and repair. Aviation
Week made a strategic investment to
add a 100,000-aircraft fleet database
that extends its portfolio to defense,
business aviation and civil aftermarkets, and nearly doubles its team of
researchers and analysts:
Aviation Week’s apps provide the
content and features visitors need to
navigate the International Paris Air
Show and Farnborough Air Show—two
of the largest events dedicated to the
aviation and aerospace industry.
Aviation Week’s editorial team
provides thought leadership from 15
news bureaus around the world. Its
editorial team effectively uses digital
tools and blogs, as well as numerous
high-profile industry events to engage
with the global community.
Aviation Week Intelligence Network (AWIN)
is a business development tool that delivers
in-depth coverage on the top global land, air,
sea, and space programs
Air Show headlines, videos, blogs and inside
perspective from Aviation Week ShowNews
MRO Prospector helps global maintenance,
repair and overhaul professionals plan and
forecast when customers will need maintenance and repair
Reporting from Aviation Week’s award-winning
team of aerospace and defense journalists
www.aviationweek.com/awin
m.aviationweek.com
A winner of BtoB magazine’s Social
Media Marketing Awards in 2012, the
apps feature:
Searchable exhibitor listings and interactive
show map of the Air Show grounds
Ares, a defense technology blog, was named
one of the “Top 10 Blogs” in 2011 by Defence IQ
Aviation Week’s events provide a unique forum
for communities to share information and
trends, and range from gatherings of 7,000+ individuals to more targeted management forums
and roundtables, to webinars and virtual events
www.aviationweek.com/aw/blogsmain
Integrated Offerings, Industry-Specific Intelligence
Aviation Week
reaches
1.2 million
aerospace
and defense
opinion
leaders and
decision
makers in
more than
185 countries
26
McGraw-Hill
Media
Data/Analytical
Tools & Services
Events
AviationWeek.com
Aviation Week & Space
Technology (AW&ST)
Business & Commercial
Aviation
ShowNews
MRO Links
AWIN (Aviation Week
Intelligence Network)
Fleet & MRO Forecasts
MRO Prospector
Market Briefings
Top Performing Companies
Top Performing Airlines
MRO Conference Series
Aerospace & Defense
Programs
Management Forums
Executive Roundtables
Webinars
McGraw-HIll Financial
Notes
2012 Investor Fact Book
27
McGraw-Hill Education
As a global leader in educational content and technology,
McGraw-Hill Education is providing customized and
adaptive digital learning solutions—for early childhood to
professionals—and has the opportunity to make education
more affordable, more accessible, and more adaptive than
ever before.
The digital integration of content, technology, and distribution
is creating significant new growth opportunities around the
globe for McGraw-Hill Education’s products and services.
How the New Operating Model Is Creating New Opportunities
and Driving Long-Term Growth
Drivers
Enablers
Legacy
Model
At McGraw-Hill Education,
technology is the key to changing
the operating model. Connecting
content and managing digital
assets globally are an essential
part of the effort to grow revenue,
reduce costs, and improve overall
workflow and productivity.
New
Operating
Model
One-way customer
relationships
Sh i ki
Shrinking
technology costs
Cl d
Cloud-based
delivery model
Interactive
i customer
relationships
One-time unit sales
Ubiquitous,
seamless
connectivity
Workflow
integration
Subscription-based revenue
Mobile
applications
Customized solutions
Long development
cycles
One-size-fits-all
Digital-savvy
customers
Physical inventory
“Big Data”
U.S.-centric
production
Rapid development cycles
Digital, data enablement
services
Digital asset management
Global production and
distribution
Direct-to-consumer sales/
distribution
Lower cost base
McGraw-Hill Education
At-a-Glance
2011 Revenue
$2.3 billion
Higher Education, Professional
and International Group
Key higher education markets:
International college, university, and
post-graduate fields/markets, and English as
a Second Language
Key professional markets:
Worldwide medicine, healthcare, engineering, science, computer technology, business,
government and general reference publishing
Higher Education, Professional
and International Group (HPI)
$1.3 billion
School Education Group
$949 million
Key international markets:
Education, business, and professional markets
School Education Group
Pre-kindergarten, elementary, secondary,
testing, supplemental, vocational, and postsecondary fields in the U.S.
28
McGraw-Hill
www.mheducation.com
McGraw-Hill Education
McGraw-Hill Education
McGraw-Hill Education is well positioned to take advantage of
new opportunities created by the rapid expansion of digital
products and services. With an extensive portfolio of digital
learning solutions that integrates digital content, McGraw-Hill
Education is providing solutions that make workflow functionality and engaging, interactive content accessible anytime,
anywhere. The higher education and professional markets are
shifting to higher-margin, subscription-based digital offerings.
Optimizing the Core Business for Profitability
Drive Operational Excellence
McGraw-Hill Education’s publishing processes are fully
digital, which means a wealth of respected educational
content can be repurposed quickly and cost-effectively
across multiple products and markets
In the new digital publishing model, McGraw-Hill Education
is supplying enhanced digital content in a wide variety
of formats—from subscription-based online sites, to
downloadable titles for e-readers and tablets, to apps for
mobile phones
Reimagining Learning
Reimagine learning in new ways that will
improve student learning and success
Focus primarily on digital, data-enablement
services
Single sign-on for college and university learning
management systems makes it possible to achieve
deeper integration across applications sets. This
creates a better user experience for instructors and
students which then promotes increased usage of
McGraw-Hill’s products and services
Innovative use of technology, such as Tegrity’s
Lecture Capture
Capturing Growth Opportunities
Leverage expertise as a content and learning
company to capture growth opportunities
Accelerate growth in key markets such as the
Middle East, India, and China through acquisitions
and strategic partnerships
Offer college and career readiness programs and other
learning products directly to students and their families
so that young people can better prepare for successful
futures while still in school or after graduation
Work with business, professional, and government
groups to create assessment and learning solutions
closely tailored to particular career requirements
Custom-Tailored
Course Content and
Learning Solutions
Student
Success
Affordability &
Accessibility
Improve retention
rates and student
learning outcomes
Ensure all students
have affordable
access to learning
materials
Classroom
Excellence
Online
Enablement
Enable faculty
success through
instructional
tools and services
Seamlessly integrate
and implement
digital services and
solutions
Where Education Is Going
Technology is playing an increasing
role in teaching and learning, and
support
Education will move very quickly
to a personalized learning model
with adaptive learning technology.
Rich algorithms, supported by deep
academic research, are going to
play a critical role in getting there
Teachers and instructors will also
play a critical role in this shift. It is
important that they are equipped to
manage the classroom as this
evolution in education occurs
How “Big Data” Will
Empower Students and
Improve Performance
Teachers: With data-driven insights,
educators are provided the information to tailor their instruction based on
the knowledge, skills, and learning
styles of students in each classroom
Parents: Increased access to data
provides parents with a clearer picture
of their child’s academic performance,
enabling them to direct their efforts to
help their child or children improve
areas of weakness and reinforce areas
of strength
Students: When students receive
immediate, specific feedback on their
performance, they are more likely
to be engaged and motivated to drive
their own learning. This type of
empowerment is critical to improving
student performance
2012 Investor Fact Book
29
HIGHER EDUCATION, PROFESSIONAL AND INTERNATIONAL GROUP
Digital Workflow Solutions for Teaching and Learning
McGraw-Hill is leveraging its trusted content in higher education
with innovative technology to provide a powerful new generation of products and services for today’s college and university
students and instructors. These are aggregated to create an
integrated offering that improves teaching and learning.
Enhancing the
Learning Experience.
Providing Real Results.
An Integrated Offering that Improves Teaching and Learning
Attend
Classes
Faculty
Student study
data capture
and analysis
(Traditional, Hybrid,
(Traditional
Hybrid
Fully Online)
-Lectu
Lecture
e and
class notes
Course
Content
Course
Assignment
-Textbooks
-E-books
Eb k
-A
Articles
A
rticles
-Multimedia
M lti di
content library
-Reading
-Homework
Homeworkk
H
-Reports
Reports
p
-Tests
Study
-Memorizing
-Rev
Reviewing
ew
wing
textbook, class
notes
-Flashcards
-Self-quizzing and
practicing
-Mastering content
Grade
Center
Online work is
automat
automatically
t
ticallly
graded and entered
graded
i grade
into
d center
®
Digital sales grew by
more than 40% in 2011
More than 1.2 million
students and professors
use McGraw-Hill Connect*
* As of June 2012
McGraw-Hill Connect™
McGraw-Hill Connect is a complete digital solution that has
evolved from a homework assignment and assessment
platform into a fully integrated learning platform that
individualizes each student’s learning process. The online
platform is based on McGraw-Hill’s extensive research of
professors’ instructional processes and students’ study
habits and workflow. The result is a reinvented learning
experience that is rich in information, visually engaging,
and easily accessible to both instructors and students.
Student Study Center: Students can access
course content, e-textbooks, a multimedia
library, and a gradebook
Instructor Resource Center: Instructors
can assign quizzes and practice exams,
review student/class performance data, and
provide feedback to students online outside
of office hours
Instructors can incorporate McGraw-Hill
LearnSmart into the McGraw-Hill Connect
platform for a more robust course offering
30
McGraw-Hill
http:// connect.mcgraw-hill.com
Student
McGraw-Hill Education
LearnSmart’s online
store opens a new
direct-to-student channel
for McGraw-Hill and for
students wanting to get
an edge in their courses
McGraw-Hill’s Tegrity
Campus had 30 new
and expanded partnerships with universities
and colleges across
the U.S. by the end of
June 2012
McGraw-Hill LearnSmart™
www.mhlearnsmart.com
McGraw-Hill LearnSmart helps students succeed by
providing a personalized learning path that’s based on
their responses to questions, as well as how confident they
feel about the answers they provide. The program also
encourages retention of the material by identifying
concepts that students are likely to forget, and directing
them back to portions of an e-book to help them solidify
their understanding of concepts. New for the 2012 fall
semester, students can purchase a subscription directly
from the LearnSmart store rather than relying on professors and institutions to select LearnSmart as part of
defined course materials. Higher education institutions
that use LearnSmart benefit by increasing student
engagement, retention, and grades.
Tegrity Campus™
Acquired by McGraw-Hill Education in 2010, Tegrity
Campus 2.0 captures all of an instructor’s class lectures
throughout a course, from audio recordings of the
professor’s voice to accompanying slides or videos shown
on the presentation screen. These complete recordings are
captured for replay and accessible to students throughout
the semester whenever they are studying or reviewing
concepts. Using the patented “search anything” technology, students can instantly locate and replay the exact
points in any of the class lectures, either on a computer or
mobile device, to improve their understanding of concepts.
www.tegrity.com
Tegrity’s new Bookmarks app lets students and professors
set digital bookmarks at certain points as the lecture is
being recorded:
Students can set digital bookmarks when
points in the lecture are unclear and they
want to relisten to a segment, or if information
seems important for a test
Instructors can set bookmarks to highlight
important points for a test and make them
visible to the entire class
Total industry higher
education e-book
revenue grew nearly
46% between 2008 and
2010. Total net revenue
for higher education
e-books in 2010 was
almost $250 million*
E-books
Top-selling higher education business, economics, science,
math, humanities, foreign languages, and social sciences
titles are available for purchase through various e-book
stores. McGraw-Hill Education is partnering with makers
of devices and other PC-based e-book software providers
as well as developing applications for the iPad. The
majority of McGraw-Hill’s higher education textbooks can
be downloaded from CourseSmart, a common industry
e-textbook and digital course materials platform.
www.CourseSmart.com
*Source: The Book Industry Study Group, Inc. (BISG) and Association of American Publishers (AAP),
“BookStats 2011, An Annual Comprehensive Study of the U.S. Publishing Industry”
2012 Investor Fact Book
31
HIGHER EDUCATION, PROFESSIONAL AND INTERNATIONAL GROUP
Adaptive Learning Suite
Developments in Cognitive Science and
Artificial Intelligence Inspire New Adaptive
Learning Tools and Personalized Learning
Traditional methods of education—lectures, books and
blackboards—are not as effective for today’s digital
natives who live in a world driven by high-speed and highly
interactive communications.
Instructors report that students
using LearnSmart are coming to
class better informed, that they
are better prepared for exams,
and that grades are improving
New tools based on these and other
concepts from cognitive science,
such as ALEKS and LearnSmart,
promise to usher in an era of
greater academic achievement as
students and instructors become
more familiar with using them.
This is particularly true for postsecondary education, as most
colleges already possess the
resources necessary to deliver
Web-based courses and homework/study programs.
Learners may someday—
regardless of age or education
level—have continuous access to
their own, individually tailored
artificial intelligence tutor—a
personalized avatar that focuses
on the particular strengths and
weaknesses of future students as
they study and reorganize their
internal knowledge structures for
optimal performance.
LearnSmart: An Adaptive Study System Based on
Cognitive Research
Grade Distribution*
With LearnSmart more C students earn a B, more B students get an A
%
%
30.5
33.5
22.6
A
B
C
19.3
38.6
28.0
8.6
4.7
D F
9.6
4.9
An important component of McGraw-Hill
Connect, LearnSmart is an adaptive
study system based on cognitive
research designed to help college
students learn faster, study more
efficiently, and retain more knowledge
for success.
With its ability to pinpoint a student’s
knowledge gaps and direct the
student to the exact section of the
e-book or textbook content for
reinforcement, LearnSmart personalizes the study environment based on
student needs. LearnSmart helps
focus students’ attention on the areas
where they need to spend the most
time, resulting in more efficient study
time for today’s student and increased
readiness for lecture and exams.
Without LearnSmart
* Based on an independent study of over 700 students studying Anatomy & Physiology I at six
distinct institutions across the country
Adaptive learning technology
focuses on individual students’
strengths and weaknesses as
they take different learning paths
Unique Learning Paths
Students enter
unique path
Students
master
subject
ALEKS®: Adaptive Assessment Determines Precisely
What a Student Knows and Is Ready to Learn Next
ALEKS is a Web-based assessment
and learning system that uses
artificial intelligence and adaptive
questioning to quickly and accurately
determine what a student knows and
doesn’t know in a subject. ALEKS then
instructs the student on the topics he
or she is most ready to learn next.
Features include:
McGraw-Hill’s ALEKS 360 is a total
mathematics solution that combines
ALEKS’ personalized learning
program with a fully integrated,
interactive e-book directly from
within the student’s account.
Ability for instructors to assign homework,
quizzes, and tests to reinforce critical concepts
www.aleks.com/highered/math/aleks360
32
McGraw-Hill
Highlighting, bookmarking, and note taking
directly within an e-book
An individualized study plan for students
with targeted instruction, step-by-step
explanations, and e-book references that
are easily accessible
McGraw-Hill Education
Institutional Solutions: Content, Technology, Services
McGraw-Hill Campus
McGraw-Hill Campus is a first-of-its-kind service that enables allows colleges to
integrate McGraw-Hill’s
McGraw-Hill to provide universal access to its digital content
and tools directly from any campus portal. That means faculty content and course
and students will have true single sign-on to all course content
solutions with any
and digital tools no matter what learning management system learning management
is being used on campus. More than 325 higher education
system
McGraw-Hill Campus®
institutions now have access.
Single sign-on
access to
McGraw-Hill’s
digital content
and tools
-Instant access
to McGraw-Hill
Campus
-All content free
Faculty
Student
-Instant access
to McGraw-Hill
Campus
-Content: free and
premium (paid)
McGraw-Hill
Connect and
McGraw-Hill
Create are
available
worldwide
directly with
Blackboard
Seamless
integration with
learning
management
systems
- Blackboard
- WebCT
- Angel Learning
- Desire2Learn
- Moodle
- Sakai
- eCollege
MH AAIRS
Middleware integrates
McGraw-Hill into
an institution’s
infrastructure and
online presence
McGraw-Hill
Campus
McGraw-Hill
Course Solutions
-McGraw-Hill Connect
-McGraw-Hill LearnSmart
-McGraw-Hill Tegrity
-McGraw-Hill Create
McGraw-Hill
Content Library
-E-books
-Assessment tools
-Presentation slides
-Multimedia content
-Test banks
McGraw-Hill/Blackboard Partnership Expanded into
International Markets
Deep integration enhances the
user experience for faculty and
students including:
McGraw-Hill Education took a major
step to improve its connectivity with
faculty and students by partnering with
Blackboard in 2010. Blackboard Learn™
is the most widely installed learning
management portal on college
campuses in the U.S. and Canada.
The partnership led to an industryleading deep integration between
McGraw-Hill’s Connect platform and
Single Sign-on: A single Blackboard log-in for
access to McGraw-Hill Connect’s content,
study tools, and instructor course management tools
the on-campus Blackboard platform.
The release became available to
millions of college students in fall 2011.
Leveraging its U.S. relationship,
McGraw-Hill entered into a global
partnership with Blackboard in spring
2011, allowing professors anywhere
in the world to integrate McGraw-Hill
Connect into their classrooms.
Integrated Grade Book: Grades for assignments, quizzes, and tests post directly to the
Blackboard grade book, eliminating the need
to manage two systems
Course Management for Instructors: Access
to McGraw-Hill Connect to manage course
content, create assignments, and track
student performance
www.DoMoreNow.com
McGraw-Hill Create™: Online Tool Enables Faculty to Customize Course Content
McGraw-Hill Create is an online
custom publishing service that enables
instructors to easily find trusted,
high-quality content and allows them
to adjust content exactly to their own
course syllabus.
1. Find and Add Content: Instructors search
and select content from a database of
4,000 textbooks, 5,000 articles, 11,000
readings, and 25,000 business case studies
2. Arrange and Personalize: Instructors
arrange the selected content and add their
own original content, along with the
course syllabus
3. Place Order Online: The instructor
selects the e-book or print version.
Students purchase the digital version
from the Create eBookstore or the hard
copy from the campus bookstore
www.mcgraw-hillcreate.com
2012 Investor Fact Book
33
HIGHER EDUCATION, PROFESSIONAL AND INTERNATIONAL GROUP
Meeting the Needs of Global Professionals
McGraw-Hill Education is aggressively leveraging digital devices,
formats, and channels to provide professional content to business,
medical, and technical customers around the world.
Serving Engaging and Interactive Content When
and Where Customers Want It
Interactive E-books
Digital Revenue
Growth: 2009–2011
CAGR: 146%
‘09
‘10
McGraw-Hill has been an active
player in e-book technology since the
first e-book reader was launched
more than 10 years ago. Today, with
the growth of tablets and e-readers,
e-books are central to McGraw-Hill’s
publishing and growth strategy.
“Enhanced” e-books offer additional
features, including interactive figures, video
interviews with experts, and assessments
‘11
Digital revenue
grew by more
than 30% in the
first half of 2012
Mobile Applications
More than 30%
of professional
revenue is from
digital products
Nearly 250 mobile applications are
available to help students and
professionals study anytime, anywhere for high-stakes tests including
AP, SAT, ACT, and USMLE exams.
McGraw-Hill’s E-book Library
McGraw-Hill’s E-book Library is a
platform for institutional clients
worldwide, offering unlimited,
concurrent access to more than 1,000
e-book titles in medicine, business,
engineering/computing, and student
study skills and test preparation.
www.mhebooklibrary.com
34
McGraw-Hill
The platform offers:
Regular updates with new books
and releases available throughout the
subscription term
Robust search capability with personalization
tools such as bookmarking and note taking
Web analytics that enable librarians to
monitor content usage
More than 6,000 e-books
are available on devices
including Amazon’s Kindle,
Barnes & Noble’s Nook,
and Apple’s iPad
McGraw-Hill Education
Digital Subscriptions Serving the Needs of Medical
Schools and Hospitals Around the World
McGraw-Hill’s online medical specialty sites provide researchers,
physicians, medical students, professors, and healthcare
professionals worldwide with integrated learning portals that
feature market-leading texts, animations, illustrations, videos,
interactive self-assessments, and curriculum tools.
AccessMedicine
Mobile is
optimized for
mobile phones
and features a
targeted subset
of content for
diagnosis
McGraw-Hill’s Access platform
enables universities, libraries,
and research institutions in
more than 65 countries to
subscribe to its trusted content
from leading scientific,
technical, and medical titles
McGraw-Hill products can be found in 100% of
medical schools in Hong Kong and Singapore
Access products are used in 95% of
U.S. and Canadian medical schools
In Turkey, AccessMedicine is available to physicians
and students through 73 hospitals and schools
Pakistan has adopted AccessMedicine for
all of its higher education institutions
Every medical school in Saudi Arabia
has access to AccessMedicine
JAMAevidence is used in 152 higher
education institutions in Brazil
Digital products are available to all higher
education institutions in Nigeria
Online
AccessEngineering
AccessEngineering has
been adopted by more
than 500 engineering
institutions in India
Developed for engineering students
and professionals, AccessEngineering
provides hundreds of thousands of
pages of McGraw-Hill’s industrystandard reference content, covering
every major discipline in the field.
Leading brands include Perry’s Chemical
Engineers Handbook, Marks’ Standard Handbook for Mechanical Engineers, and Roark’s
Formulas for Stress and Strain
Online resources include instructional videos,
interactive graphs and tables, curriculum
guides, and daily engineering news feeds
www.accessengineeringlibrary.com
2012 Investor Fact Book
35
SCHOOL EDUCATION GROUP
Digital Solutions: Better Teaching, Better Learning
All of McGraw-Hill
Education’s content for
elementary and secondary
schools is available in
digital form
McGraw-Hill Education is a leading innovator in the development of 21st
century teaching and learning solutions for K–12 education markets, offering
traditional and digital instructional, assessment and reference content, and
tools for teachers and students. Critical areas in primary and secondary education are being addressed through McGraw-Hill’s Learning Solutions Centers:
• Literacy & Humanities
• STEM (Science, Technology, Engineering, and Math)
• Readiness & Intervention Solutions
McGraw-Hill created an additional Center to meet the challenges of
education in the 21st century—the Center for Digital Innovation. This
first-of-its-kind research and development center focuses on creating
technology-driven digital platforms and solutions that help engage children
in their own learning, create personalized learning paths to address their
individual needs, and raise achievement.
www.mheonline.com
Engaging Students In and Out of the Classroom
New Mobile Learning Apps
All-Digital Curriculum for Math and Science
Math Games
CINCH® Learning is a complete
learning system, offering comprehensive content in math and science for
grades 6–12. Designed for use as a
core instructional program, CINCH
comprises two complete 6–12
curriculum strands and includes
elementary support lessons for better,
differentiated learning. CINCH
Learning is designed for use in an
all-digital environment or can be used
in conjunction with a custom-print
solution.
Available for the iPad, iPhone, and iPod
Touch, these one- or two-player games
offer a quick and easy way for schoolaged children to practice and reinforce
basic addition facts, number comparisons, fraction concepts, and more.
Math Games from
Everyday Mathematics®
CINCH Learning helps teachers
engage today’s digital natives by
combining the power and flexibility of
classroom technology with McGrawHill’s most current research-based
math and science programs. With
CINCH Learning, teachers can plan,
teach, assess, and differentiate
instruction from one robust online
tool. Teachers can also customize
content and pull supporting resources
from other grade levels to meet the
individual needs of their students, or
add their own resources.
CINCH Learning allows instructors to create
a compelling learning experience with:
-Social networking tools that encourage
collaboration and communication
-Educational games that make learning fun
-Content, assessments, homework, and
multimedia resources that are assigned to
each individual student based on specific
learning needs
CINCH Learning provides a unique planning
and teaching experience with:
-Material that is delivered through any
device, including computers, tablets, and
mobile devices
-Cloud-based access to math and science
content that is fully customizable for
districts, administrators, and teachers
www.mheonline.com/apps
CINCH Learning is
delivered through cloud
computing and represents
a new subscription
revenue model for the
6–12 market
www.mhecdi.com
36
McGraw-Hill
McGraw-Hill Education
Digital Solutions to Increase Student Engagement,
Personalize Learning, and Drive Achievement
Exploring Abstract Math
Concepts through Digital
Visualization
Transforming One-on-One
Computing Classrooms with
the Digital Teaching Platform
The most widely recognized digital
math modeling tool in the market,
The Geometer’s Sketchpad ® allows
teachers and students to turn abstract
ideas about numbers, algebra,
geometry, and more into concrete
representations. Dynamic models allow
students to construct relationship-based
models to test and explore concepts.
Sketchpad is the signature product of
Key Curriculum, which was acquired
by McGraw-Hill Education in 2012.
Time To Know is a comprehensive
curriculum and digital teaching platform
that teachers use to manage all
classroom activities and to deliver a
personalized curriculum to every student.
Students explore the content through
engaging animations, hands-on explorations
of key concepts through applets, and
personalized practice which leads to deeper
conceptual understanding
Preparing Students for
Success after High School
To address the problem of the
growing number of students who are
unprepared to enter college or the
workforce, McGraw-Hill Education has
created a first-of-its-kind, all-digital
program designed to promote
post-secondary success.
The College & Career Readiness
program provides digital tools and
guidance to students on a range of
topics including:
A real-time teacher dashboard provides
notification of students’ progress and alerts
teachers to those who need extra attention
and assistance
Relevancy of academic course work to
real-world careers
McGraw-Hill Education announced an
exclusive licensing agreement in 2012
with Time To Know to develop an
all-digital, data-driven differentiated
teaching and learning platform for
one-to-one computing classrooms.
Financing college
www.keycurriculum.com
www.timetoknow.com
http://ready.ccr.mcgraw-hill.com
Power of U: Creating a
New Classroom Experience
McGraw-Hill Networks™:
A Social Studies Learning System
McGraw-Hill Education’s Power of U is
an all-digital math program designed
to improve learning outcomes by
providing highly individualized
instruction and assessment. Each day’s
lesson is tailor-made, based on each
student’s progress the previous day.
McGraw-Hill Networks is a new
research-based learning system for
social studies. Developed for grades
6–12, students use engaging resources
to interact with history, geography,
economics, government, and culture in
new ways that bring abstract concepts
to life and increase understanding.
In addition, students are involved in
project-based learning which increases
critical thinking, engagement, and
academic skill development.
Sketchpad was developed with funding
from the National Science Foundation
and has been recognized with multiple
industry awards, including:
“Best Educational Software of All Time” by a
survey of mentor teachers
“Cool Tool Award” by 2011 EdTech Digest
Named Potential “Game Changer” in
Education by EdNet’s “Best of 2011”
The data-driven program uses an adaptive,
personalized model to analyze what a student
knows and is ready to learn next
Skills are taught using the most appropriate
instruction method: teacher-led, small group,
one-on-one tutoring, computer-assisted
instruction
Successful pilot studies in 2010, 2011, and
2012 improved math grades significantly
Teachers can use the program as an all-digital
or hybrid print/digital learning system
Transitional life skills, such as financial
literacy, leadership skills, and social skills
Navigating the college application process
Choosing a career path
www.mcgrawhillnetworks.com
In 2012, McGraw-Hill Networks received
several national education technology and
industry curriculum awards
2012 Investor Fact Book
37
SCHOOL EDUCATION GROUP
Assessment and Reporting Market:
Shaping the Pre-K–12 Learning Continuum
McGraw-Hill Education is a leader in testing—serving more than 18 million
students in all 50 states and globally across dozens of countries in the pre-K–12
and adult education markets. McGraw-Hill Education’s broad capabilities in test
development, data management, technology, test security, scoring, and reporting
support the development and management of customized assessment solutions
that can scale to all levels—national, state, district, and individual school.
Total Pre-K–12 Assessments: Revenue Estimates and Forecast
Testing Terminology
Summative assessments:
Once-a-year, high-stakes
achievement assessments to
compare student performance
nationally and/or provide valid
and reliable measures of learning
and growth against standards
Interim (formative) and benchmark assessments: Tests given
throughout the school year that
align with state and Common Core
Standards, diagnose progress,
predict performance, and provide
measures of performance growth
(dollars in millions)
2011-12
High-stakes state level
(summative)
$1,074
Paper
608
Online
376
Projected
2012-13 2013-14
$998
585
413
$1,072
446
626
2014-15
2015-16
CAGR
2011-12 to
2015-16
$1,165
219
946
$1,194
192
1,001
3%
(25%)
28%
Online assessment revenue
is projected to surpass
paper-and-pencil by 2015-2016
Total Paper, Online Revenue
(dollars in millions)
$2,000
Classroom level
(formative, interim,
test prep)
Paper
Online
$1,271
1,004
267
$1,340
1,047
293
$1,326
1,003
322
$1,427
1,077
351
$1,473
1,084
389
4%
2%
10%
Total
Paper
Online
$2,344
1,702
643
$2,338
1,632
706
$2,388
1,439
948
$2,559
1,262
1,296
$2,631
1,240
1,391
3%
(8%)
21%
Source: Karen Raugust and the editors of Simba Information. “PreK-12 Testing Market Forecast
2012-2013” (Stamford, CT: Simba Information, 2012), page 58
Projected
3-year CAGR
+21%
1,500
-8%
1,000
500
‘12
Paper
’13
’14
’15
’16
Online
Federal Funding and Assessments
In the U.S., the assessment market is responding to new forces, such
as Common Core State Standards (CCSS), assessment consortia
(Smarter Balanced and PARCC), Race to the Top, Investing in Innovation
(i3), School Improvement Grants, the National Educational Technology
Plan, and proposed Elementary and Secondary Education Act (ESEA)
reforms to develop the next generation of assessments. The table below
summarizes the federal grants available for pre-K–12 education.
McGraw-Hill Solutions
Support Federal Title I
and IDEA Funding
Acuity®
CTB Online Reporting System
Program
Summary
Title I
Title I provides financial assistance to Local Education
Agencies (LEAs) and schools with high numbers or high
percentages of poor children to help children meet
challenging state academic standards.
Race to the Top
(RTTT)
RTTT funds competitive state grants to advance reform
in four specific areas: standards and assessments; data
systems; effective teachers and principals; and turning
around low-performing schools. RTTT also funds Early Learning Challenge grants and a new district-level competition.
RTTT Common
Core Assessment
Programs
RTTT provides competitive funding to consortia of states
to develop assessments that are valid, support and inform
instruction, measure the Common Core Standards, and
provide accurate information about what students know
and can do.
Investing in
Innovation (i3)
i3 provides competitive grants to applicants with a record
of improving student achievement in order to expand the
implementation of, and investment in, innovative practices.
School
Improvement
Grants
School Improvement Grants are used to strengthen student
achievement in schools identified as needing improvement,
corrective action, or restructuring so as to enable those
schools to make Adequate Yearly Progress (AYP) and
demonstrate sustained progress.
IDEA
IDEA provides grants to states and public educational
agencies to support special education for children with a
wide diversity of disabilities.
CTB Professional Development
First Performances™
LAS Links®
SUPERA
TerraNova™, Third Edition
Writing Roadmap™
Yearly ProgressPro™
www.CTB.com/Grants
38
McGraw-Hill
In 2012, districts
must spend
more than
$2.5 billion of
Title I funds
carried over
from 2011
McGraw-Hill Education
Assessments from
McGraw-Hill Education
are delivered in
multiple formats
Online
Paper and Pencil
Handheld Student
Response Devices
Assessment and Reporting Solutions—Serving the Needs of All Learners
Pre-K–12
Reading and mathematics assessments and
instructional guidance for pre-K through
grade 3 students; monitors student progress
toward state standards
(Grades pre-K–3)
www.CTB.com/FirstPerformances
McGraw-Hill
Education
was selected
by the
Smarter
Balanced
Assessment
Consortium
to develop
the first set
of test items
for the new
Common Core
assessments
Personalized parent engagement plans based
on student assessment results. Provides families
with immediate 24/7 online access to their
child’s test results
www.CTB.com/Services/
CustomOnlineReporting
The Software &
Information Industry
Association (SIIA)
has recognized
Acuity in the “Best
Student Assessment
Solution” category
Yearly ProgressPro™ is based on 25 years
of research and is used extensively
in Response-to-Intervention programs in
schools and districts across the U.S. to raise
student achievement. Students work online
and their progress is captured in a data
management system that allows teachers to
monitor progress in real time
(Grades 1–8)
www.CTB.com/YearlyProgressPro
(Grades K–12)
www.CTB.com/TerraNova3
Award-winning interim and benchmark
assessment solution that informs teaching and
improves student learning. Acuity is aligned
to the Common Core State Standards and
includes performance tasks and technologyenhanced items. Available in online and
paper-and-pencil formats
English- and Spanish-Language Proficiency
Assessment—a comprehensive and
integrated system of assessment,
instructional placement, instructional
guidance, and support for all Englishlanguage learners. LAS Links is available
in online and paper-and-pencil formats
(Grades K–12)
www.CTB.com/Acuity
(Grades pre-K–12)
www.CTB.com/LASLinks
Adult
Industry
Awards for
Acuity
Standardized achievement tests in reading,
language arts, mathematics, science, and
social studies available in paper-and-pencil
format and online. Compares student
performance against their national peers
based on empirical norms and measures
student growth within and across school years.
TerraNova Common Core is aligned to the
Common Core State Standards and features
innovative items that deliver an authentic
measure of higher order thinking skills and an
increased depth of knowledge
Diagnostic assessments and instructional
support for adult students, including Basic
Education and English as a Second Language
An online essay scoring tool utilizing artificial
intelligence that provides continual practice
and automatic feedback. Its easy-to-use
interface and instructional tools motivate and
guide students through each step of the
writing process
(Grades 3–12, college and adult learners)
www.CTB.com/WritingRoadmap
students. TABE is available in adaptive, online,
and paper-and-pencil formats
www.CTB.com/TABE
Diagnostic and Predictive Benchmark Assessments
for the Formative Market
Acuity®
Acuity, an InFormative Assessment™
solution, is an award-winning assessment program that helps teachers
gauge student performance and
deliver data-driven instruction for
every student. Acuity features a suite
of diagnostic and predictive formative,
benchmark, and interim assessments
designed to measure student growth
toward state standards and the
Common Core State Standards in reading, English/language arts, and
mathematics. Assessments align to
CCSS in high school and monitor
student progress toward college and
career readiness.
Acuity contains all the elements of a
comprehensive assessment system:
Acuity is used by more
than 100,000 teachers
and 1.5 million students
Standards-aligned, pre-built assessments for
state and Common Core State Standards
Instructional resources
24/7 access to reports that indicate if interventions are required and reflect student growth
www. CTB.com/Acuity
Ability to customize assessments
2012 Investor Fact Book
39
SCHOOL EDUCATION GROUP
Pre-K–16 Public Education:
Funding, Expenditures, and Enrollments
Growth in Public Education Funding
The 2013 federal budget was submitted to Congress by President Obama in
February 2012. The request included increasing spending on elementary and
secondary education programs to $38.5 billion, a 1.2% increase compared to
2012 levels. If enacted, higher education expenditures would increase 4.6%
to $28 billion, compared to 2012. The actual appropriations for fiscal year 2013
(October 2012—September 2013) must be authorized by the full Congress
before the budget can take effect.
Public school systems
received $593.7 billion
in funding in 2010, an
increase of 0.5% from
2009
Funding for pre-K–12 education in the United States
reached approximately $594 billion in the 2009-10
school year. State and local governments contributed
87.5% of this total and the federal government
provided 12.5%. In any given year, more than
two-thirds of state funding comes from sales and
income tax. At the local level, property taxes accounted for approximately 65% of the local funding total.
The Public Education Dollar:
Revenues by Source
Sources of State Funding
Sources of Local Funding
Total State Revenue: $258.2 billion
Total Local Revenue: $261.4 billion
Total Revenue: $593.7 billion
Sales and
Income Tax 68.4%
Federal 12.5%
Property Taxes 64.8%
Other 35.2%
State 43.5%
Other 31.6%
Local 44.0%
Source: U.S. Census Bureau, “Public Education Finances: 2010,” June 2012
46 states’ fiscal year is
July 1 to June 30
Other fiscal years:
Apr. 1 – Mar. 31
New York
Sept. 1 – Aug. 31
Texas
Oct. 1 – Sept. 30
Alabama and Michigan
Increasing Expenditures for Students
By the 2020–21 school year,
expenditures are projected to
increase by 14% to slightly more
than $11,900 per student.
Current and Projected Expenditures per Pupil in K–12
(in thousands, in constant 2008–2009 dollars)
$12
Projected
9
6
3
‘05
‘06
‘07
‘08
‘09
‘10
‘11
‘12
‘13
‘14
‘15
‘16
‘17
‘18
‘19
‘20
9.9 10.2 10.4 10.4 10.4 10.4 10.4 10.4 10.5 10.8 11.0 11.2 11.4 11.6 11.8 11.9
Source: U.S. Department of Education, National Center for Education Statistics,
"Projections of Education Statistics to 2020," September 2011
Note: Details may not sum to total due to rounding
40
McGraw-Hill
McGraw-Hill Education
Growing Enrollments
In the United States, school enrollments continue to rise across the entire
pre-K–16 student population.
By 2020, 57.9 million students will be enrolled in grades pre-K–12, according
to the latest projections by the National Center for Education Statistics. Enrollment in degree-granting higher education institutions is projected to increase
by 13% to 23.0 million students in 2020.
Public School Pre-Kindergarten Enrollment, 2002–2010
(number of students in thousands)
1,400
1,050
700
350
‘02-’03
‘03-’04
‘04-’05
‘05-‘06
‘06-‘07
915
950
990
1,036
1,084
‘07-‘08
‘08-’09
‘09-’10
1,180
1,223
1,081
Source: U.S. Department of Education, National Center for Education Statistics,
Common Core of Data
Enrollment in preKindergarten through
grade 8 is projected to
increase by 8% between
2008 and 2020
Enrollment in Elementary and Secondary Institutions
(enrollment in millions)
60
Projected
45
30
15
‘06
‘07
‘08
‘09
‘10
‘11
‘12
‘13
‘14
‘16
‘15
‘17
‘18
‘19
‘20
PK-8
38.7
38.6
38.6
38.7
38.9
39.2
39.4
39.6
39.9
40.2
40.6
40.9
41.3
41.7
9-12
16.5
16.4
16.2
16.0
15.8
15.7
15.7
15.8
16.0
16.0
16.0
16.1
16.1
16.3
Total 55.2
55.0
54.8
54.7
54.7
54.9
55.1
55.5
55.8
56.2
56.6
57.0
57.4
57.9
Source: U.S. Department of Education, National Center for Education Statistics,
"Projections of Education Statistics to 2020," September 2011
Enrollment in U.S. Higher Education Institutions
(enrollment in millions)
20
Projected
24 years and younger
25 years and older
15
10
5
‘07
‘08
‘09
‘10
‘11
‘12
‘13
‘14
‘16
‘15
‘17
‘19
‘18
‘20
≤24
11.2
11.6
12.3
12.5
12.6
12.6
12.7
12.8
12.9
12.9
13.0
13.1
13.2
≥25
7.1
7.5
8.1
8.1
8.1
8.1
8.3
8.5
8.8
9.0
9.3
9.5
9.6
9.6
Total 18.2
19.1
20.4
20.6
20.7
20.7
20.9
21.3
21.7
22.0
22.3
22.5
22.8
23.0
13.4
Source: U.S. Department of Education, National Center for Education Statistics,
"Projections of Education Statistics to 2020," September 2011
Note: Details may not sum to total due to rounding
2012 Investor Fact Book
41
SCHOOL EDUCATION GROUP
Growing Enrollments in Key Adoption States
Mapping the Adoption Process
In the adoption process, a state education board selects elementary
and secondary textbooks to be placed on an approved list. To use state
education funds, local school districts must choose textbooks from the
approved list. In adoption states, the state board issues curriculum
guidelines and schedules the purchase of new books in each subject
area. In the remaining states, known as “open territories,” textbooks
are purchased independently by local school districts or individual
schools. There are no statewide purchasing schedules or state-selected
lists of textbooks.
Changing U.S. Pre-K–12 Enrollment by Region and State, 2008–2020
Northeast:
– 3.0%
Midwest:
– 1.0%
WA
ME
ND
MT
West:
+ 13.0%
VT
MN
OR
ID
WI
SD
NY
MI
WY
PA
IA
NE
NV
IL
UT
CO
CA
KS
OH
IN
MO
WV
VA
CT
NJ
RI
NH
MA
DE
MD
KY
AZ
NC
TN
NM
OK
SC
AR
MS
TX
South:
+ 10.0%
AL
GA
LA
Total U.S. Enrollment
Growth: 6.9%
Between 2008 and 2020 enrollment
in public elementary and secondary
schools is projected to increase in
36 states as well as the District of
Columbia and decline in 14 states,
translating into a 6.9% national increase
in public school enrollment overall.
FL
AK
Projected Enrollment Growth in Key
Adoption States, 2008–2020
HI
■ Adoption States (20 States)
■ Open Territories (30 States)
States in which school districts must purchase
educational materials that have been
“adopted” at the state level in order to qualify
for state funding
States in which schools purchase educational
materials independently
Notes:
California adopts for grades K–8; grades 9–12
are open territory
Utah and Oregon issue state-recommended lists,
but do not tie textbook choices to funding
Industry Textbook Sales
Adoption States, Open Territories
(Pre-K–12)
(dollars in millions)
$2,500
1,875
1,250
625
‘08
42
‘09
‘10
Adoption States ($) 2,132
1,605
1,865
Open Territories ($) 1,904
1,677
1,544
McGraw-Hill
Source: AAP, “2010 Annual Industry Statistics,” as
reported by 5 publishers. Includes non-specified
materials. Excludes non-domestic sales of $146
million, $106 million, and $113 million for 2010,
2009, and 2008, respectively. Also excludes
domestic Advanced Placement sales of $156
million, $153 million, and $154 million for 2010,
2009, and 2008, respectively
Texas
22.7%
North Carolina
15.1%
Florida
5.9%
Virginia
9.4%
California
9.3%
Source: U.S. Department of Education, National Center
for Education Statistics, “Projections of Education
Statistics to 2020,” September 2011
McGraw-Hill Education
Pre-K–12 Market Sales
Note: Detailed annual 2011 data was not available at the time the 2012
Investor Fact Book was issued
Effective January 1, 2010,
the “basal” and
“supplemental”
categories in AAP’s
elementary-high school
$4,000
statistics were combined
into a single “instruc3,000
tional materials”
category, reflecting shifts
in the academic product
2,000
marketplace, as many
instructional materials are
1,000
now used for both “basal”
‘09
‘10
‘11
and “supplemental”
6–12
1,413 1,438 1,272
purposes in order to
maximize teaching and
Pre-K–6
2,061 2,171 1,999
learning. This change
Total
$3,475 3,609 $3,271
reflects trends in the
Source: AAP, “Monthly El-Hi Book Publishing Sales Report,” elementary-high school
publishing industry and
December 2010 and December 2011, as reported
by 9 publishers. Includes sales of U.S. products only the market it serves.
Pre-K–6 Net Sales by State (1)
6–12 Net Sales by State (1)
In 2011, sales of textbooks and educational
materials for the pre-K–12 school market
decreased 9.4% to $3.3 billion, according to
the Association of American Publishers.
Total Net Elementary/High School Sales
Instructional Materials
(dollars in millions)
Annual spending for digital materials
increased 33% and represented nearly
20% of the total market in 2010*
*Source: The Book Industry Study Group, Inc. (BISG) and Association of American
Publishers (AAP), “BookStats 2011, An Annual Comprehensive Study of the
U.S. Publishing Industry”
Instructional Materials
(dollars in thousands)
1 Texas
2 California
3 Florida
Top 3 for 2010
4 New York
5 Pennsylvania
6 Illinois
7 New Jersey
8 Michigan
9 Ohio
10 Georgia
Top 10 for 2010
11 North Carolina
12 Indiana
13 Missouri
14 Massachusetts
15 Virginia
Top 15 for 2010
All Others
Total Domestic U.S.
Instructional Materials
2010
% of
2010
total
2009
2008
$ 343,294
227,799
147,128
$ 718,221
116,649
99,110
88,584
67,697
63,831
55,656
46,309
$ 1,256,057
35,353
32,290
31,046
30,947
28,442
$ 1,414,135
$ 547,860
$ 1,961,995
17.5%
11.6%
7.5%
36.6%
5.9%
5.1%
4.5%
3.5%
3.3%
2.8%
2.4%
64.0%
1.8%
1.6%
1.6%
1.6%
1.4%
72.1%
27.9%
100.0%
$ 183,023
235,253
85,222
$ 503,498
133,030
96,946
86,506
77,332
53,288
68,932
66,459
$ 1,085,991
59,928
40,361
34,598
30,950
35,856
$ 1,287,684
$ 571,876
$ 1,859,560
$ 238,442
306,340
172,112
$ 716,894
145,933
93,377
124,401
76,141
41,109
66,908
89,321
$ 1,354,084
51,152
39,332
37,012
32,479
35,050
$ 1,549,109
$ 739,524
$ 2,288,633
Pre-K–6 Sales by Subject Category (2)
(dollars in millions)
2010
% of
2010
total
Reading / Literature
$ 963 46.9%
Mathematics
653 31.8%
Interdisciplinary
193 9.4%
Language Arts / English
71 3.5%
Science
64 3.1%
Social Studies
54 2.7%
Computer / Technology
19 0.9%
Music
16 0.8%
All Others
21 1.0%
Total
$2,054 100.0%
2009
(dollars in thousands)
1 Texas
2 Florida
3 California
Top 3 for 2010
4 New York
5 Pennsylvania
6 Illinois
7 Ohio
8 Tennessee
9 New Jersey
10 Michigan
Top 10 for 2010
11 Georgia
12 Indiana
13 Virginia
14 Maryland
15 North Carolina
Top 15 for 2010
All Others
Total Domestic U.S.
2010
% of
2010
total
$ 256,046
119,362
105,676
$ 481,084
82,873
58,354
55,695
45,225
42,108
39,287
37,994
$ 842,620
34,487
31,015
27,180
26,160
22,498
$ 983,960
$ 371,304
$ 1,355,264
18.9%
8.8%
7.8%
35.5%
6.1%
4.3%
4.1%
3.3%
3.1%
2.9%
2.8%
62.2%
2.5%
2.3%
2.0%
1.9%
1.7%
72.6%
27.4%
100.0%
2009
$
62,987
66,054
165,468
$ 294,509
82,716
59,560
93,201
57,700
53,798
44,615
36,320
$ 722,419
44,147
52,774
25,475
29,077
20,422
$ 894,314
$ 428,499
$ 1,322,813
2008
$
65,975
60,689
264,390
$ 391,054
122,791
62,151
76,675
55,218
47,048
53,855
46,803
$ 855,595
92,072
72,186
30,156
34,441
59,270
$ 1,143,720
$ 550,326
$ 1,694,046
6–12 Sales by Subject Category (2)
% of
2009
total
$ 825 43.0%
614 32.0%
127 6.6%
93 4.9%
102 5.3%
78 4.1%
24 1.2%
20 1.0%
37 1.9%
$1,920 100.0%
2008
% of
2008
total
$ 994 42.1%
712 30.2%
104 4.4%
104 4.4%
200 8.5%
136 5.8%
17 0.7%
39 1.7%
52 2.2%
$2,359 100.0%
(dollars in millions)
2010
% of
2010
total
Reading / Literature
$ 360 25.8%
Mathematics
326 23.4%
Science
170 12.2%
Social Studies
150 10.8%
Foreign Language
93 6.7%
Language Arts / English
89 6.4%
Interdisciplinary
86 6.2%
Business Education
33 2.4%
All Others
87 6.2%
Total
$1,393 100.0%
2009
% of
2009
total
$ 198 14.6%
295 21.8%
222 16.4%
216 15.9%
106 7.8%
106 7.8%
68 5.0%
37 2.7%
109 8.0%
$1,357 100.0%
2008
% of
2008
total
$ 243 14.1%
380 22.0%
318 18.4%
278 16.1%
124 7.2%
147 8.5%
71 4.1%
46 2.7%
120 6.9%
$1,727 100.0%
(1) Source: AAP, “2010 Annual Industry Statistics,” as reported by 5 publishers. State ranking
varies each year in accordance with adoption cycle
(2) Source: AAP, “2010 Annual Industry Statistics,” as reported by 5 publishers. Excludes
non-specified and Advanced Placement sales
2012 Investor Fact Book
43
SCHOOL EDUCATION GROUP
El-Hi Adoption Opportunities
Adoption states select print and digital instructional materials for one or more core disciplines
each bid/purchase year. Adoption cycles vary by state. Generally most operate on a six- or sevenyear cycle and a few are on a shorter cycle (i.e., three, four, five years). Over the last few years
states have elongated their cycles for adopting new materials. Elementary and secondary
adoption schedules provide some visibility into the state new adoption market for several years.
The presence or absence of adoption states with large student enrollments—such as California,
Florida, and Texas—will influence the size of the market opportunity each year.
Elementary School Adoption Schedule
Bid Year
2011
2012
2013
2014
2015
2016
Purchase Year 2012
2013
2014
2015
2016
2017
2018
Reading
Mississippi
Virginia (K-5)
Oregon (CCSS)
Georgia
New Mexico
West Virginia
–
Oklahoma (PK-5)
Texas (K-5)
West Virginia 1
Mathematics
Alabama
Louisiana (3-6)
Texas
West Virginia 1
Idaho
Oregon (CCSS)
West Virginia 1
West Virginia 1
Oklahoma
Tennessee (K-5)
Alabama
West Virginia
Social Studies
Florida
Oregon
Alabama
California (CCSS) 1
Florida (K-5)
Idaho (K-5)
Louisiana (K-5)
Oklahoma (PK-5)
Tennessee
Arkansas
California (CCSS) 1
Florida (K-5)
Georgia
Louisiana (K-2)
Mississippi
New Mexico
Oregon (CCSS) 1
South Carolina
West Virginia 1
Oklahoma
West Virginia
Alabama
Tennessee
West Virginia 1
Virginia
West Virginia 1
–
Idaho
New Mexico
Texas (Sup’l Science) (5-6)
Virginia
Florida
Idaho
New Mexico
West Virginia 1
Louisiana
West Virginia 1
–
Science
Arkansas
Louisiana
Texas
West Virginia 1
Arkansas
Alabama
Tennessee
West Virginia 1
Language Arts/
English
Oklahoma
South Carolina (K-5)
Georgia
West Virginia
–
Oklahoma (PK-5)
Texas (K-5)
West Virginia 1
Health (H)
Physical
Education (PE)
Art (A)
Music (M)
Drama (D)
Speech (S)
Spelling
Louisiana (H, PE)
New Mexico (H, PE)
South Carolina (H)
Louisiana (A, M)
Oklahoma (S)
Tennessee (A, M)
Idaho (H, PE)
Oklahoma (H)
West Virginia (H) 1
Alabama (A, M, D)
Idaho (A, M, D)
West Virginia (A, M) 1
Louisiana (H, PE)
Oregon (H, PE)
West Virginia (H) 1
West Virginia (A, M) 1
Alabama (H, PE)
West Virginia (H) 1
Mississippi (A, M, D)
Oklahoma (A, M)
Mississippi (H, PE)
Tennessee
West Virginia (H) 1
Texas (A, M)
West Virginia
Mississippi
Georgia
–
–
Oklahoma (PK-5)
Tennessee (1-6)
Literature
–
–
–
–
–
–
World
Languages
South Carolina
(American Sign
Language)
–
Florida
Mississippi
Virginia
West Virginia
Oregon
West Virginia 1
Computer
Education
Arkansas
Idaho
Tennessee (1-6)
–
Idaho
Idaho
Texas
Florida
Idaho
Alabama
Georgia
Idaho
Oklahoma
Texas
Idaho
Oklahoma
Idaho
Oklahoma (PK-5)
–
–
Tennessee (1-6)
Alabama
Idaho
Louisiana
–
Alabama
Idaho (K-5)
Oklahoma (PK-5)
Alabama
Idaho (K-5)
Oklahoma (PK-5)
Mississippi
–
–
–
Louisiana
Oklahoma (PK-5)
Mississippi
Georgia
–
–
Oklahoma (PK-5)
Tennessee (1-6)
English as a
Second Language
(ESL)
Handwriting
Louisiana
Dictionaries
–
Alabama
California (CCSS) 1
Florida (K-5)
Idaho (K-5)
Louisiana (K-5)
Oklahoma (PK-5)
Oregon (CCSS) 1
Arkansas (H, PE)
South Carolina
(H Science) 1
Alabama (S)
Idaho (S) (K-5)
New Mexico (A, M)
Alabama
Idaho (K-5)
Oklahoma (PK-5)
Alabama
California (CCSS) 1
Florida (K-5)
South Carolina
(American
Sign Language)
Georgia 1
North Carolina
Oklahoma
Texas
West Virginia
Mississippi
Oregon (CCSS)
West Virginia (H)
Source: AAP School Division/National Association of State Textbook Administrators (NASTA)
Notes: Elementary adoptions are for grades PK–6, unless otherwise noted
Secondary adoptions are for grades 6–12, unless otherwise noted
Adoption opportunities provided for information only as timelines are tentative based
on state funding and implementation of standards
Adoption cycle details pending state’s invitation to bid
44
McGraw-Hill
Florida
Oregon
West Virginia 1
(1) Mid-contract adoptions and/or reviews in response to Common Core State Standards (CCSS)
may not generate contracts or provide allocated funds
2017
Idaho
West Virginia 1
Louisiana (A, M)
Tennessee (A, M)
West Virginia (A, M) 1
Louisiana
Oklahoma (PK-5)
McGraw-Hill Education
46 states and the District of Columbia have adopted the
Common Core State Standards (CCSS)—a shared set of English/
Language Arts and math standards—as of spring 2012. States will
adopt instructional materials that incorporate the new standards,
beginning as early as the 2012/2013 bid/purchase year
Secondary School Adoption Schedule
Bid Year
2011
2012
2013
2014
2015
2016
2017
Purchase Year 2012
2013
2014
2015
2016
2017
2018
Mathematics
Alabama
South Carolina (9-12) 1
Florida
Louisiana
Texas (6-8)
West Virginia 1
Idaho
Oregon (CCSS)
Texas (9-12)
West Virginia 1
West Virginia 1
Oklahoma
Tennessee
Alabama
West Virginia
Science
Idaho
New Mexico
South Carolina (9-12) 1
Texas (Sup’l Science)
Virginia
Florida
Oregon
Arkansas
California (CCSS) (6-8) 1
Georgia
Louisiana
Mississippi
New Mexico
Oregon (CCSS) 1
South Carolina (6-8)
West Virginia (6-8) 1
–
Georgia
North Carolina
Oklahoma
Texas
West Virginia
Alabama
Tennessee
West Virginia 1
Alabama
Arkansas
Tennessee
West Virginia 1
Florida
Oregon
West Virginia 1
Louisiana
West Virginia 1
Idaho
West Virginia 1
Arkansas
Louisiana
Texas
West Virginia 1
Georgia
New Mexico (9-12)
Oklahoma
Georgia
New Mexico (9-12)
Oklahoma
Virginia
West Virginia 1
–
Georgia (9-12)
New Mexico (6-8)
Florida
Idaho
New Mexico
West Virginia 1
–
New Mexico (6-8)
West Virginia
West Virginia (9-12) 1
West Virginia 1
Georgia (6-8)
New Mexico (9-12)
Oklahoma
Georgia (9-12)
Tennessee
West Virginia
West Virginia (9-12) 1
West Virginia 1
Florida
Mississippi
New Mexico
(Fr, Span, Latin) (9-12)
Virginia
Social Studies
Literature
Reading
Mississippi
Tennessee
Virginia
Mississippi (6-8)
Language Arts/
English
Oklahoma
South Carolina (9-12) 1
Virginia
World
Languages
Louisiana
South Carolina
(American Sign
Language)
Business
Education
Georgia
South Carolina
Tennessee
Computer
Arkansas
Education
Georgia
Idaho
South Carolina
Tennessee
Health (H)
Louisiana (H, PE)
Physical Education New Mexico (H, PE)
(PE)
Tennessee (H Science)
(9-12)
Family/
Georgia
Consumer
Science
Art (A)
Louisiana (A, M)
Music (M)
Oklahoma (S)
Drama (D)
Tennessee (A, M) (D 9-12)
Speech (S)
Vocational/
Georgia
Technical
Louisiana
Education
Tennessee
Career/
Georgia
Workforce
Louisiana
Education
Tennessee (9-12)
Driver
Tennessee (9-12)
Education
Mississippi
Oklahoma
South Carolina
West Virginia
Alabama
California (CCSS) 1
Alabama
California (CCSS) 1
Oklahoma
Tennessee (6-8)
Alabama
California (CCSS) (6-8) 1
Oregon (CCSS) 1
South Carolina
South Carolina
(American Sign
Language)
Florida
Louisiana
Florida
Idaho
Louisiana
Oregon (CCSS)
Florida
Idaho
Louisiana
Mississippi
Oregon (CCSS)
–
Tennessee
–
New Mexico
Florida
Idaho
Alabama
West Virginia
Georgia (9-12)
Idaho
New Mexico (Fr, Span 6-8)
Oklahoma
Tennessee
Texas
Louisiana
Alabama
Oklahoma
Texas
Idaho
Oklahoma (9-12)
Idaho
Texas
Florida
Idaho
Idaho
Oklahoma (9-12)
Alabama
Idaho
Louisiana
Idaho
Tennessee
Arkansas (H, PE)
South Carolina
(H Science)
West Virginia (H)
Idaho (H, PE)
Oklahoma (H, PE)
West Virginia (H) 1
Louisiana (H, PE)
Oregon (H, PE)
West Virginia (H) 1
Alabama (H, PE)
Tennessee (H Science) (9-12)
West Virginia (H) 1
–
–
–
Alabama (A, M) (D)
Idaho (A, M) (D)
West Virginia (A, M)
West Virginia (A, M) 1
Louisiana (A, M)
Tennessee (A, M) (D 9-12)
West Virginia (A, M)
Louisiana
Oklahoma
West Virginia 1
Louisiana
Oklahoma
Alabama
Texas
West Virginia 1
Alabama
Texas
Tennessee
West Virginia 1
Idaho
West Virginia 1
West Virginia 1
Tennessee (9-12)
West Virginia 1
Alabama (S)
New Mexico (A, M)
(D 9-12)
Florida (9-12)
Mississippi (H, PE)
Tennessee
West Virginia (H) 1
New Mexico
Idaho
Mississippi
Tennessee
Idaho (S)
Oklahoma (S)
Mississippi (A, M) (D)
Texas (A, M)
Oklahoma (A, M) (D 9-12) West Virginia
South Carolina
New Mexico
Florida
Idaho
–
New Mexico (9-12)
–
New Mexico (9-12)
Florida (9-12)
Idaho
West Virginia (9-12)
Alabama (9-12)
Arkansas (9-12)
Mississippi (9-12)
West Virginia (9-12)
–
2012 Investor Fact Book
Louisiana
Oregon
West Virginia 1
Tennessee
Tennessee (9-12)
45
Notes
46
McGraw-Hill
Financial Review
Eleven-Year Financial Review
The 2012 Investor Fact Book provides an historical, eleven-year financial
review of The McGraw-Hill Companies.
To reflect changes being created by the Growth and
Value Plan, new names for some operations were
introduced:
Standard & Poor’s Ratings Services
(formerly Standard & Poor’s segment)
S&P Capital IQ/S&P Indices
(formerly McGraw-Hill Financial segment)
Commodities & Commercial Markets
(formerly Information & Media segment)
McGraw-Hill Education
After separation, the newly named McGraw-Hill
Financial will report financial results for five lines
of business:
Standard & Poor’s Ratings Services
S&P Capital IQ
S&P Dow Jones Indices(1)
Commodities
Commercial Markets
Notes: Results for the four current operating segments have been recast on an annual basis for six years (2006–2011) and on a
quarterly basis for 2011 and 2010
Results have not been recast for the years 2001 to 2005
In this presentation, the segment noted as “Combined S&P Ratings, S&P Capital IQ/S&P Indices” was formerly named
“Financial Services” from 2001 to 2009
A summary of items affecting comparability of results is provided on pages 62 and 63
(1) The S&P Dow Jones Indices joint venture was launched on June 29, 2012
2012 Investor Fact Book
47
The McGraw-Hill Companies:
Committed to Creating Shareholder Value
39th Consecutive Year
of Dividend Increases
A record of strong free cash
flow enables The McGraw-Hill
Companies to return substantial
capital to shareholders
while continuing to invest in
high-growth global brands
and businesses. As part
of the Growth and Value
Plan, the Company spent
$1.5 billion to repurchase
35.7 million shares between
January 2011 and April 2012.
$1 Billion in Share Repurchases
$500 Million Accelerated Share
Repurchase Program
In 2011, the Company spent $1 billion
on share repurchases: 26 million
shares from the 2011 repurchase
authorization and an additional
8 million shares, which completed
the 2007 repurchase authorization
In January 2012, the Board of
Directors increased the dividend
for the 39th consecutive year
Since 1974, MHP’s annual dividend
has grown at an average compound
rate of 9.6%
The Company also entered into
a $500 million accelerated share
repurchase program in December 2011
The majority of the shares were
delivered in 2011 and the accelerated
share repurchase program was
completed in April 2012
24 million shares remained in the 2011
repurchase program at year end
The Company has returned more than
$11.5 billion to shareholders since 1996,
including $1.8 billion in 2011
Free Cash Flow
Years ended December 31
(dollars in millions)
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Cash provided by
operating activities
$ 1,344
$ 1,458
$ 1,330
$ 1,178
$ 1,721
$ 1,511
$ 1,561
$ 1,064
$ 1,383
$ 1,143
$ 1,100
(158)
(151)
(177)
(254)
(299)
(277)
(258)
(238)
(218)
(249)
(295)
Investment in prepublication costs
Capital expenditures
Free cash flow before dividends
(119)
(115)
(92)
$ 1,067
$ 1,192
$ 1,061
(131)
(246)
(150)
(137)
793
$ 1,176
$ 1,084
$ 1,166
$
$
(150)
(143)
676
$ 1,022
(125)
$
769
(146)
$
659
Dividends paid to shareholders
(296)
(292)
(281)
(281)
(278)
(260)
(246)
(228)
(207)
(197)
(190)
Dividends paid to noncontrolling
interests
(12)
(19)
(9)
(9)
(4)
(2)
(1)
–
–
–
–
Tax payment/(dividend) from
divestitures (1,2,3)
48
–
–
–
–
–
–
172
(104)
–
–
Free cash flow after dividends
$
807
$
881
$
771
$
503
$
894
$
822
$
919
$
620
$
711
$
572
$
469
(1) 2011, $48 million tax payment on gain from disposition of the Broadcasting Group
(2) 2004, $172 million tax payment related to a 2003 gain from sale of real estate
(3) 2003, $104 million dividend received from the sale of the Company’s equity interest in real estate
Net (Cash) Debt to EBITDA
Years ended December 31
(dollars in millions)
Cash and equivalents &
short-term investments
$
Total debt
2011
2010
2009
973
$ 1,548
$ 1,210
1,198
Net (cash) debt
$
Net (cash) debt to EBITDA
1,198
225
$
$
1,198
(350)
0.1x
2008
$
(12)
(0.2x)
472
2007
$
1,268
$
0.0x
796
396
2006
$
354
$
(351)
1,197
$
0.5x
801
2005
$
749
$
(746)
3
0.5x
2004
$
681
$
(676)
3
(0.2x)
2003
$
696
$
(670)
5
(0.5x)
2002
$
58
26
(0.5x)
$
(0.5x)
2001
$
54
578
1,057
520
$ 1,003
0.5x
1.3x
10-year
CAGR
Note: EBITDA is net of investment in prepublication costs
Cash Returned to Shareholders
2011
(dollars in millions, except S&P 500 dividend)
MHP dividends paid
$ 296
MHP shares repurchased
2010
$
1,500
Total
$ 1,796
MHP growth
$
S&P 500 growth
26
13%
$
548
$
23
1%
McGraw-Hill
281
$
–
$
95%
Note: Shares repurchased are reported on a settlement-date basis
N/M indicates a non-meaningful or non-calculable variance
48
$
256
N/M
S&P 500 dividend
292
2009
281
$
(61%)
$
22
(21%)
$
2008
2007
2006
2005
2004
2003
2002
2001
281
$ 278
$ 260
$ 246
$ 228
$ 207
$ 197
$ 190
4.5%
447
2,213
1,540
678
409
216
183
177
23.8%
728
$ 2,491
$ 1,800
$ 924
$ 637
$ 423
$ 380
$ 367
17.2%
(71%)
38%
95%
45%
51%
11%
4%
5%
28
2%
$
28
11%
$
25
12%
$
22
14%
$
19
12%
$
17
8%
$
16
2%
$
16
(3%)
5.0%
Financial Review
Consolidated Profit and Loss
Consolidated Profit and Loss
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
$ 6,246
$ 6,072
$ 5,870
$ 6,355
$ 6,772
$ 6,255
$ 6,004
$ 5,251
$ 4,890
$ 4,708
$ 4,534
Total expenses
4,624
4,479
4,484
4,871
4,935
4,665
4,509
3,950
3,789
3,695
3,768
Total operating profit
1,622
1,593
1,386
1,484
1,837
1,590
1,495
1,301
1,101
1,013
766
(200)
(180)
(127)
(109)
(160)
(163)
(125)
(124)
38
(92)
(93)
(75)
(82)
(77)
(76)
(41)
(13)
(5)
(6)
(7)
(22)
(55)
1,347
1,331
1,182
1,299
1,636
1,414
1,365
1,171
1,132
899
618
489
483
429
480
609
523
516
413
442
325
238
(in millions, except per share data)
Total revenue
General corporate income/(expense)
Interest (expense), net
Income from continuing operations
before taxes on income
Provision for taxes on income
Effective tax rate
36.3%
Income from continuing operations
$
858
36.3%
$
848
36.3%
$
753
$
36.9%
37.2%
819
$ 1,027
37.0%
$
891
37.8%
$
849
35.2%
$
758
39.1%
$
690
36.2%
$
38.6%
574
$
380
Discontinued operations
Net earnings/(loss) from
discontinued operations
76
4
(3)
–
–
–
–
(1)
(0)
4
(1)
Net income
934
852
750
819
1,027
891
849
757
690
578
379
Less: Net income attributable to
noncontrolling interests
(23)
(24)
(19)
(20)
(13)
(9)
(5)
(2)
(2)
(1)
(2)
Net income attributable to
The McGraw-Hill Companies
$
911
$
828
$
2.75
$
2.64
$
731
$
799
$ 1,014
$
882
$
844
$
755
$
688
$
2.34
$
2.51
$
$
2.40
$
2.21
$
1.96
$
1.79
$
577
$
377
1.47
$
0.96
Diluted earnings per share
Income from continuing operations
$
Discontinued operations
0.25
Net income
$
3.00
0.01
$
2.65
(0.01)
$
2.33
2.94
–
$
–
2.51
$
2.94
–
$
2.40
–
$
Revenue and Operating Profit
Diluted EPS
(dollars in millions)
(in dollars)
$7,000
$3.00
5,250
2.25
3,500
1.50
1,750
0.75
‘01
Revenue ($)
Operating profit ($)
‘02
‘03
‘04
‘05
‘06
‘07
‘08
‘09
‘10
‘11
4,534 4,708 4,890 5,251 6,004 6,255 6,772 6,355 5,870 6,072 6,246
2.21
–
$
1.96
–
$
1.79
0.01
$
‘01
‘02
‘03
‘04
‘05
‘06
‘07
.96
1.48
1.79
1.96
2.21
2.40
2.94 2.51
‘08
–
1.48
$
0.96
‘09
‘10
2.33
2.65 3.00
‘11
766 1,013 1,101 1,301 1,495 1,590 1,837 1,484 1,386 1,593 1,622
Note: Details may not sum to total and percentages may not recalculate due to rounding
2012 Investor Fact Book
49
Operating Segments at a Glance
Standard & Poor’s Ratings Services
(formerly named Standard & Poor’s)
2011 Revenue
2011 Operating Profit
Segment Revenue and Operating Profit and Margin
$1.8 billion
28.3% of total revenue
$719 million
44.3% of total
operating profit
(dollars in millions)
28.3%
2011
2010
2009
Revenue
$ 1,767
$ 1,695
$ 1,537
Operating profit
$ 719
$ 762
$ 712
Operating profit margin
40.7%
45.0%
46.3%
44.3%
S&P Capital IQ/S&P Indices
(formerly named McGraw-Hill Financial)
2011 Revenue
2011 Operating Profit
Segment Revenue and Operating Profit and Margin
$1.4 billion
21.7% of total revenue
$403 million
24.9% of total
operating profit
(dollars in millions)
S&P Capital IQ 16.5%
S&P Indices 5.2%
2011
2010
2009
Revenue
$ 1,354
$ 1,189
$ 1,122
Operating profit
$ 403
$ 315
$ 302
Operating profit margin
29.8%
26.5%
26.9%
24.9%
Segment Revenue by Group
2011
2010
2009
S&P Capital IQ
$ 1,031
$ 916
–
S&P Indices
$ 323
$ 273
–
(dollars in millions)
Commodities & Commercial Markets
(formerly named Information & Media)
2011 Revenue
2011 Operating Profit
Segment Revenue and Operating Profit and Margin
$896 million
14.3% of total revenue
$180 million
11.1% of total
operating profit
(dollars in millions)
Commodities 6.7%
2011
2010
2009
Revenue
$ 896
$ 811
$ 873
Operating profit
$ 180
$ 153
$
Operating profit margin
20.1%
18.9%
11.0%
2011
2010
2009
Commodities
$ 419
$ 344
–
Commercial Markets
$ 477
$ 467
–
96
11.1%
Commercial 7.6%
Segment Revenue by Group
(dollars in millions)
McGraw-Hill Education
2011 Revenue
2011 Operating Profit
Segment Revenue and Operating Profit and Margin
$2.3 billion
36.7% of total revenue
$320 million
19.7% of total
operating profit
(dollars in millions)
HPI 21.5%
2011
2010
2009
Revenue
$ 2,292
$ 2,433
$ 2,387
Operating profit
$ 320
$ 363
$ 276
Operating profit margin
14.0%
14.9%
11.6%
2011
2010
2009
Higher Education, Professional
and International Group (HPI)
$ 1,343
$ 1,324
$ 1,275
School Education Group (SEG)
$
$ 1,109
$ 1,112
19.7%
SEG 15.2%
Segment Revenue by Group
(dollars in millions)
Note: Total segment revenue percentages greater than 100% due to intersegment revenue eliminations
The Broadcasting Group was reclassified as a discontinued operation and is not included in results
for 2009, 2010 and 2011
50
McGraw-Hill
949
Financial Review
Quarterly Results
2011 vs. 2010
(in millions, except earnings per share)
2011
1Q
2Q
%
2010 Change
%
2010 Change
2011
3Q
2011
4Q
%
2010 Change
2011
Full Year
%
2010 Change
2011
%
2010 Change
Revenue
S&P Ratings
S&P Capital IQ/S&P Indices
Commodities & Commercial
McGraw-Hill Education
Intersegment royalties
Total revenue
$ 443
324
206
303
(15)
$1,261
$ 401
279
187
317
(13)
$1,171
10%
16%
10%
(4%)
15%
8%
$ 480
333
222
537
(15)
$1,557
$ 405
294
199
565
(14)
$1,449
19%
13%
12%
(5%)
7%
7%
$ 410
349
229
936
(16)
$1,908
$ 417
294
204
1,055
(14)
$1,956
(2%)
19%
12%
(11%)
14%
(2%)
$ 434
348
239
516
(17)
$1,520
$ 472
322
221
496
(15)
$1,496
(8%) $1,767
8%
1,354
8%
896
4%
2,292
13%
(63)
2% $6,246
$1,695
1,189
811
2,433
(56)
$6,072
4%
14%
10%
(6%)
13%
3%
Segment Expense
S&P Ratings
S&P Capital IQ/S&P Indices
Commodities & Commercial
McGraw-Hill Education
Intersegment royalties
Total segment expense
$ 253
228
167
378
(15)
$1,011
$ 212
208
157
379
(13)
$ 943
19%
10%
6%
0%
15%
7%
$ 267
235
173
495
(15)
$1,155
$ 224
211
155
512
(14)
$1,088
19%
11%
12%
(3%)
7%
6%
$ 241
237
178
621
(16)
$1,261
$ 230
208
160
698
(14)
$1,282
5%
14%
11%
(11%)
14%
(2%)
$ 287
251
198
478
(17)
$1,197
$ 267
247
186
481
(15)
$1,166
7% $1,048
2%
951
6%
716
(1%) 1,972
13%
(63)
3% $4,624
$ 933
874
658
2,070
(56)
$4,479
12%
9%
9%
(5%)
13%
3%
Segment Operating Profit
S&P Ratings
S&P Capital IQ/S&P Indices
Commodities & Commercial
McGraw-Hill Education
Total segment operating profit
$ 190
96
39
(75)
$ 250
$ 189
71
30
(62)
$ 228
1%
35%
30%
(21%)
10%
$ 213
98
49
42
$ 402
$ 181
83
44
53
$ 361
18%
18%
11%
(21%)
11%
$ 169
112
51
315
$ 647
$ 187
86
44
357
$ 674
(10%)
30%
16%
(12%)
(4%)
$ 147
97
41
38
$ 323
$ 205
75
35
15
$ 330
(28%) $ 719
29%
403
17%
180
N/M
320
(2%) $1,622
$ 762
315
153
363
$1,593
(6%)
28%
18%
(12%)
2%
34
35
(3%)
44
38
16%
41
44
(7%)
81
63
29%
200
180
11%
216
19
197
72
193
22
171
62
12%
(14%)
15%
16%
358
20
338
122
323
22
301
109
11%
(9%)
12%
12%
606
18
588
214
630
19
611
222
(4%)
(5%)
(4%)
(4%)
242
18
224
81
267
19
248
90
(9%)
(5%)
(10%)
(10%)
1,422
75
1,347
489
1,413
82
1,331
483
1%
(9%)
1%
1%
125
109
15%
216
192
12%
374
389
(4%)
143
158
(9%)
858
848
1%
(1)
124
(2)
107
(50%)
16%
–
216
2
194
N/M
11%
(1)
373
1
390
N/M
(4%)
78
221
3
161
N/M
37%
76
934
4
852
N/M
10%
(4)
(4)
5%
(5)
(3)
67%
(7)
(10)
(30%)
(7)
(7)
0%
(23)
(24)
(3%)
$ 120
$ 103
16%
$ 211
$ 191
10%
$ 366
$ 380
(4%)
$ 214
$ 154
39%
$ 911
$ 828
10%
309.6
316.3
(2%)
309.2
313.2
(1%)
303.6
309.3
(2%)
292.0
310.3
(6%)
303.6
312.3
(3%)
$ 0.39
$
–
$ 0.34
$ (0.01)
15%
N/M
$ 0.68
$
–
$ 0.60
$ 0.01
13%
N/M
$ 1.21
$
–
$ 1.23
$
–
(2%)
–
$ 0.47
$ 0.26
$ 0.49
$ 0.01
(4%) $ 2.75
N/M $ 0.25
$ 2.64
$ 0.01
4%
N/M
$ 0.39
$ 0.33
18%
$ 0.68
$ 0.61
11%
$ 1.21
$ 1.23
(2%)
$ 0.73
$ 0.50
46%
$ 2.65
13%
General corporate expense
Earnings before interest
and taxes
Interest (expense), net
Income before taxes on income
Provision for taxes on income
Income from continuing
operations
(Loss) income from discontinued
operations, net of tax
Net income
Less: Net income attributable
to noncontrolling interests
Net income attributable to
The McGraw-Hill Companies
Diluted weighted average
shares outstanding
Diluted earnings per share:
Continuing operations
Discontinued operations
Total diluted earnings
per share
$ 3.00
Note: N/M indicates a non-meaningful or non-calculable variance
Details may not sum to total due to rounding
2012 Investor Fact Book
51
Operating Segment Trends
Revenue by Segment
(dollars in millions)
S&P Ratings
% increase/(decrease)
% of total
S&P Capital IQ/S&P Indices
% increase/(decrease)
% of total
Combined S&P Ratings,
S&P Capital IQ/S&P Indices (1)
% increase/(decrease)
% of total
Commodities & Commercial (2)
% increase/(decrease)
% of total
McGraw-Hill Education
% increase/(decrease)
% of total
Intersegment elimination
Total revenue
% increase/(decrease)
2011
$ 1,767
4%
28%
$ 1,354
14%
22%
2010
$ 1,695
10%
28%
$ 1,189
6%
20%
2009
$ 1,537
(3%)
26%
$ 1,122
1%
19%
2008
$ 1,583
(26%)
25%
$ 1,113
18%
18%
2007
$ 2,138
10%
32%
$ 942
14%
14%
2006
$ 1,950
–
31%
$ 824
–
13%
2005
–
–
–
$
–
–
–
2004
–
–
–
$
–
–
–
2003
–
–
–
$
–
–
–
2002
–
–
–
$
–
–
–
2001
–
–
–
$
–
–
–
$
$
$
$
$
$
$ 2,401
17%
40%
$ 931
16%
16%
$ 2,672
12%
45%
$
–
$ 6,004
14%
$ 2,055
16%
39%
$ 800
3%
15%
$ 2,396
2%
46%
$
–
$ 5,251
7%
$ 1,768
14%
36%
$ 773
(5%)
16%
$ 2,349
0%
48%
$
–
$ 4,890
4%
$ 1,555
11%
33%
$ 810
(4%)
17%
$ 2,343
2%
50%
$
–
$ 4,708
4%
$ 1,398
16%
31%
$ 846
(16%)
19%
$ 2,290
12%
51%
$
–
$ 4,534
7%
$
$
$
$
–
–
–
896
10%
14%
2,292
(6%)
37%
(63)
6,246
3%
$
$
$
$
–
–
–
811
(7%)
13%
2,433
2%
40%
(56)
6,072
3%
$
$
$
$
–
–
–
873
(18%)
15%
2,387
(10%)
41%
(49)
5,870
(8%)
$
$
$
$
–
–
–
1,062
4%
17%
2,639
(2%)
42%
(42)
6,355
(6%)
$
$
$
$
–
–
–
1,020
4%
15%
2,706
7%
40%
(34)
6,772
8%
$
$
$
$
–
–
–
985
6%
16%
2,524
(6%)
40%
(28)
6,255
4%
$
$
$
$
$
Expenses by Segment
(dollars in millions)
S&P Ratings
% increase/(decrease)
S&P Capital IQ/S&P Indices
% increase/(decrease)
Combined S&P Ratings,
S&P Capital IQ/S&P Indices (1)
% increase/(decrease)
Commodities & Commercial (2)
% increase/(decrease)
McGraw-Hill Education
% increase/(decrease)
Intersegment elimination
Total expense
% increase/(decrease)
2011
$ 1,048
12%
$ 951
9%
$
$
$
$
$
–
–
716
9%
1,972
(5%)
(56)
4,624
3%
2010
933
13%
$ 874
7%
$
$
$
$
$
$
–
–
658
(15%)
2,070
(2%)
(56)
4,479
0%
2009
825
(1%)
$ 820
4%
$
$
$
$
$
$
–
–
777
(20%)
2,111
(9%)
(49)
4,484
(8%)
2008
834
(15%)
$ 792
8%
$
$
$
$
$
$
–
–
970
1%
2,317
1%
(42)
4,871
(1%)
2007
979
15%
$ 731
3%
$
$
$
$
$
$
–
–
956
2%
2,303
5%
(34)
4,935
6%
2006
853
–
$ 713
–
$
$
$
$
$
$
–
–
935
7%
2,192
(3%)
(28)
4,665
3%
2005
–
–
$
–
–
2004
–
–
$
–
–
2003
–
–
$
–
–
2002
–
–
$
–
–
$
$
$
$
$ 1,380
14%
$ 870
28%
$ 2,259
10%
$
–
$ 4,509
14%
$ 1,215
10%
$ 681
3%
$ 2,054
1%
$
–
$ 3,950
4%
$ 1,101
11%
$ 663
(4%)
$ 2,025
1%
$
–
$ 3,789
3%
$
$
$
$
$
995
2%
692
(11%)
2,008
0%
–
3,695
(2%)
2001
–
–
$
–
–
$
$
$
$
$
$
972
18%
781
(2%)
2,015
16%
–
3,768
13%
(1) Revenue for S&P Ratings and expenses for S&P Capital IQ/S&P Indices include an intersegment royalty charged to S&P Capital IQ/S&P Indices for the rights to use and distribute content and data
developed by S&P Ratings
(2) Commodities & Commercial includes the Broadcasting Group for 2008 and prior. The Broadcasting Group was reclassified as a discontinued operation and is not included in results for 2009, 2010 and 2011
52
McGraw-Hill
Financial Review
Operating Profit by Segment
(dollars in millions)
S&P Ratings
% increase/(decrease)
% of total
S&P Capital IQ/S&P Indices
% increase/(decrease)
% of total
Combined S&P Ratings,
S&P Capital IQ/S&P Indices (1)
% increase/(decrease)
% of total
Commodities & Commercial (2)
% increase/(decrease)
% of total
McGraw-Hill Education
% increase/(decrease)
% of total
Total operating profit
% increase/(decrease)
2011
719
(6%)
44%
$ 403
28%
25%
2010
762
7%
48%
$ 315
4%
20%
2009
712
(5%)
51%
$ 302
(6%)
22%
2008
749
(35%)
50%
$ 321
52%
22%
2007
$ 1,159
6%
63%
$ 211
90%
11%
2006
$ 1,097
–
69%
$ 111
–
7%
2005
–
–
–
$
–
–
–
2004
–
–
–
$
–
–
–
2003
–
–
–
$
–
–
–
2002
–
–
–
$
–
–
–
2001
–
–
–
$
–
–
–
$
$
$
$
$
$
–
–
–
$
50
(18%)
3%
$ 332
(20%)
21%
$ 1,590
6%
$ 1,021
22%
68%
$
61
(49%)
4%
$ 413
21%
28%
$ 1,495
15%
$
840
26%
65%
$ 119
8%
9%
$ 342
6%
26%
$ 1,301
18%
$
667
19%
61%
$ 110
(7%)
10%
$ 324
(3%)
29%
$ 1,101
9%
$
560
31%
55%
$ 118
82%
12%
$ 335
22%
33%
$ 1,013
32%
$
426
11%
56%
$
65
(69%)
8%
$ 275
(11%)
36%
$ 766
(15%)
$
–
–
–
$ 180
18%
11%
$ 320
(12%)
20%
$ 1,622
2%
$
–
–
–
$ 153
59%
10%
$ 363
32%
23%
$ 1,593
15%
$
–
–
–
$
96
4%
7%
$ 276
(14%)
20%
$ 1,386
(7%)
$
–
–
–
$
92
44%
6%
$ 322
(20%)
22%
$ 1,484
(19%)
–
–
–
$
64
28%
3%
$ 403
21%
22%
$ 1,837
16%
$
$
$
$
$
Operating Profit Margin by Segment
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
S&P Ratings
S&P Capital IQ/S&P Indices
Commodities & Commercial
McGraw-Hill Education
Total operating profit margin
40.7%
29.8%
20.1%
14.0%
26.0%
45.0%
26.5%
18.9%
14.9%
26.2%
46.3%
26.9%
11.0%
11.6%
23.6%
47.3%
28.8%
8.7%
12.2%
23.4%
54.2%
22.4%
6.3%
14.9%
27.1%
56.3%
13.5%
5.1%
13.2%
25.4%
–
–
6.6%
15.5%
24.9%
–
–
14.9%
14.3%
24.8%
–
–
14.2%
13.8%
22.5%
–
–
14.6%
14.3%
21.5%
–
–
7.7%
12.0%
16.9%
Combined S&P Ratings,
S&P Capital IQ/S&P Indices*
36.7%
38.1%
38.9%
40.3%
45.0%
44.0%
42.5%
40.9%
37.7%
36.0%
30.5%
* Adjusted for intersegment revenue elimination
2012 Investor Fact Book
53
Expanding Globally
Foreign Source Revenue by Segment
Since 2002, MHP’s year-over-year
revenue growth from abroad has
outpaced domestic performance.
In 2011, foreign sources accounted
for 32% of MHP’s total revenue
versus 18% in 2001
Domestic and Foreign Source Revenue Growth, 2001 – 2011 (1,2)
(dollars in billions)
$7
Domestic 10-year CAGR: 1.3%
Foreign 10-year CAGR: 9.7%
5
4
2
Domestic
Foreign
Total
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
‘09
‘10
‘11
$3.7
0.8
$4.5
$3.8
0.9
$4.7
$3.9
1.0
$4.9
$4.1
1.1
$5.3
$4.7
1.3
$6.0
$4.7
1.5
$6.3
$5.0
1.8
$6.8
$4.6
1.8
$6.4
$4.1
1.7
$5.9
$4.3
1.8
$6.1
$4.2
2.0
$6.2
Total Company (1, 2)
Standard & Poor’s Ratings Services (1, 2)
S&P Capital IQ/S&P Indices (1, 2)
(dollars in millions)
(dollars in millions) (percent of total foreign source revenue)
(dollars in millions) (percent of total foreign source revenue)
$2,500
$1,000
$500
49%
43%
44%
1,875
43%
21%
43%
750
20%
375
17%
19%
14%
1,250
500
250
625
250
125
‘07
‘08
‘09
‘10
‘11
1,764 1,776 1,726 1,800 1,998
‘07
‘08
‘09
‘10
‘11
‘07
‘08
‘09
‘10
‘11
863
775
738
776
857
243
307
324
360
413
Commodities & Commercial Markets (1)
McGraw-Hill Education (1)
(dollars in millions) (percent of total foreign source revenue)
(dollars in millions) (percent of total foreign source revenue)
$400
$500
17%
300
15%
16%
16%
25%
25%
24%
23%
21%
375
13%
200
250
100
125
‘07
‘08
‘09
‘10
‘11
‘07
‘08
‘09
‘10
‘11
237
264
276
280
346
439
453
412
415
417
(1) Foreign source revenue includes international sales by U.S. operations
(2) Does not include adjustment for intersegment revenue elimination
Note: Details may not sum to total due to rounding
54
McGraw-Hill
Financial Review
More than 30% of 2011
international revenue
came from emerging
markets
Geographic Region and Percent of Total Foreign Source Revenue (1)
(dollars in millions)
$2,000
1,500
1,000
5-year CAGR for
Foreign Source
Revenue
500
‘06
EMEA
Asia
Canada
Latin America
Total
‘08
‘07
$ 884
376
156
114
$1,530
58%
25%
10%
7%
100%
$1,031
426
176
131
$1,764
58%
24%
10%
7%
100%
‘09
$1,021
439
181
135
$1,776
57%
25%
10%
8%
100%
‘10
$ 964
468
181
113
$1,726
56%
27%
10%
7%
100%
‘11
$ 987
499
189
126
$1,800
55%
28%
10%
7%
100%
$1,101
557
205
134
$1,998
55%
28%
10%
7%
100%
EMEA
4.5%
Asia
8.2%
Canada
5.7%
Latin America
3.3%
Total
5.5%
Note: Details may not sum to total due to rounding
Domestic and Foreign Source Revenue by Segment
(dollars in millions)
Revenue
Domestic
Foreign (1)
Total
2011
% of
2011
total
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
10-year
CAGR
$ 4,248
1,998
$ 6,246
68%
32%
100%
$ 4,272
1,800
$ 6,072
$ 4,144
1,726
$ 5,870
$ 4,579
1,776
$ 6,355
$ 5,009
1,764
$ 6,772
$ 4,725
1,530
$ 6,255
$ 4,666
1,338
$ 6,004
$ 4,120
1,130
$ 5,251
$ 3,925
965
$ 4,890
$ 3,848
860
$ 4,708
$ 3,739
795
$ 4,534
1.3%
9.7%
3.3%
$
$
$
808
$ 1,275
$ 1,214
$
$
$
$
$
Revenue by Segment
Domestic
S&P Ratings
$ 916
S&P Capital IQ/
S&P Indices
943
Combined S&P Ratings,
S&P Capital IQ/
S&P Indices
–
Commodities
& Commercial
551
McGraw-Hill Education
1,875
Intersegment elimination
(36)
Total
$ 4,248
Foreign(1)
S&P Ratings
$ 857
S&P Capital IQ/
S&P Indices
413
Combined S&P Ratings,
S&P Capital IQ/
S&P Indices
–
Commodities
& Commercial
346
McGraw-Hill Education
417
Intersegment elimination
(35)
Total
$ 1,998
Number of Employees
Domestic
Foreign
Total
22%
924
800
–
–
–
–
–
22%
831
798
806
700
608
–
–
–
–
–
–
–
–
–
–
–
1,630
1,413
1,259
1,126
1,014
531
13%
44%
(1%)
100%
43%
596
798
783
787
749
666
645
682
721
2,019
1,976
(34)
(25)
$ 4,272 $ 4,144
2,186
(19)
$ 4,579
2,267
(16)
$ 5,009
2,131
(14)
$ 4,725
2,287
–
$ 4,666
2,041
–
$ 4,120
2,021
–
$ 3,925
2,040
–
$ 3,848
2,004
–
$ 3,739
$
$
$
$
$
$
$
$
$
776
$
738
775
863
736
–
–
–
–
–
21%
360
324
307
243
217
–
–
–
–
–
–
–
–
–
–
–
771
642
510
430
384
280
276
415
412
(30)
(24)
$ 1,800 $ 1,726
264
453
(23)
$ 1,776
237
439
(18)
$ 1,764
197
393
(14)
$ 1,530
182
385
–
$ 1,338
134
355
–
$ 1,130
128
327
–
965
128
303
–
860
125
286
–
795
17%
21%
(2%)
100%
$
$
$
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
11,592
11,068
22,660
11,410
9,345
20,755
11,336
9,741
21,077
11,986
9,663
21,649
12,565
8,606
21,171
12,860
7,354
20,214
13,486
6,114
19,600
13,122
4,131
17,253
12,736
3,332
16,068
13,180
3,325
16,505
13,566
3,569
17,135
(1) Foreign source revenue includes international sales by U.S. operations
2012 Investor Fact Book
55
Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA)
Total Company EBITDA
Standard & Poor’s Ratings Services
S&P Capital IQ/S&P Indices
(dollars in millions)
(dollars in millions)
(dollars in millions)
$2,000
$1,200
$500
1,500
900
375
1,000
600
250
500
300
125
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
‘09
‘10
‘08
‘09
‘10
‘11
‘07
‘08
‘09
‘10
‘11
1,159 749
712
762
719
211
321
302
315
403
‘07
‘11
843 1,044 1,255 1,302 1,521 1,588 1,838 1,553 1,415 1,554 1,578
Commodities & Commercial Markets
McGraw-Hill Education
(dollars in millions)
(dollars in millions)
$200
$500
150
375
100
250
50
125
‘07
‘08
64
92
‘09
96
‘10
‘11
‘07
‘08
‘09
‘10
‘11
153
180
403
322
276
363
320
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
2011
2010
2009
2008
2007
2006
$ 719
$ 762
$ 712
$ 749
$ 1,159
$ 1,097
403
315
302
321
211
111
–
–
–
–
–
–
–
–
–
–
–
1,021
840
667
560
426
Commodities & Commercial
180
153
96
92
64
50
61
119
110
118
65
McGraw-Hill Education
320
363
276
322
403
332
413
342
324
335
275
Total segment operating profit
$ 1,622
$ 1,593
$ 1,386
$ 1,484
$ 1,837
$ 1,590
$ 1,495
$ 1,301
$ 1,101
$ 1,013
$ 766
Less: Corporate expense (income)
200
180
127
109
160
163
125
124
(38)
92
93
1,422
1,413
1,259
1,375
1,677
1,427
1,370
1,177
1,139
921
673
98
98
106
120
113
113
107
92
83
87
86
(dollars in millions)
2005
2004
2003
2002
2001
Segment operating profit
S&P Ratings
S&P Capital IQ/S&P Indices
Combined S&P Ratings,
S&P Capital IQ/S&P Indices
Earnings before interest and taxes (EBIT)
Depreciation
Amortization of intangibles
EBITDA
56
McGraw-Hill
$
–
$
–
$
–
$
–
$
–
58
43
50
58
48
48
44
33
33
36
84
$ 1,578
$ 1,554
$ 1,415
$ 1,553
$ 1,838
$ 1,588
$ 1,521
$ 1,302
$ 1,255
$ 1,044
$ 843
Financial Review
Capital Investments
Investments, Depreciation and Amortization by Segment
2011
(dollars in millions)
2010
2009
Capital Expenditures
S&P Ratings
2010
2009
Depreciation
$
41
S&P Capital IQ/S&P Indices
9
Commodities & Commercial
13
McGraw-Hill Education
47
Corporate
2011
(dollars in millions)
$
35
$
30
S&P Ratings
14
S&P Capital IQ/S&P Indices
6
4
Commodities & Commercial
40
37
15
25
$
9
McGraw-Hill Education
$
12
23
13
8
7
9
51
50
54
8
14
$ 110
$
McGraw-Hill Education
$ (158)
$ (151)
$ (177)
S&P Ratings
Total
$ (158)
$ (151)
$ (177)
S&P Capital IQ/S&P Indices
21
10
9
Commodities & Commercial
10
10
8
88
Investment in Prepublication Costs
Corporate
22
$ 118
Total
3
$
Total
6
6
$
98
5
$
97
$ 105
$
2
$
1
Amortization of Intangibles
Amortization of Prepublication Costs
McGraw-Hill Education
$ 198
$ 246
$ 270
McGraw-Hill Education
Total
$ 198
$ 246
$ 270
Total
25
$
58
$
22
$
43
9
24
$
50
2012 Investor Fact Book
57
Acquisitions and Divestitures
Acquisition and divestiture
amounts reflect those
reported on McGraw-Hill’s
U.S. GAAP cash flow
statement and are not
indicative of actual purchase/
sale prices due to purchase
price adjustments and
other timing differences
in payments/receipts.
Divestiture amounts also
include proceeds received
from the disposition of
property and equipment.
Acquisitions
2011
$200 million
● RAM Holdings Berhad (5% interest)
● TRIS Corporation Limited (5% interest)
▲ BENTEK Energy LLC
▲ Steel Business Briefing Group
■ Bookette Software Company
■ Inkling (2% interest)
■ Unigo (5.5% interest)
2010
$364 million
● Pipal Research Corporation
★ Thomson Reuters databases
(contingent payment)
★ TheMarkets.com LLC
■ Ambow Education Holding Ltd.
(1% interest)
■ Starting Out!™
■ Tegrity Ltd.
2009
No acquisitions
Divestitures
$238 million
★DPC Data
▲ LinkedIn Corporation (0.45% interest)
▲ JDPA Estimate
▲ McGraw-Hill Broadcasting
■ Ebrary (2.4% interest)
$31 million
● CRISIL National Commodity &
Derivatives Exchange Ltd.
(7% of 12% interest)
● CRISIL Gas Strategies
(remaining 10% interest)
★ Return on investment in
The Markets.com LLC
■ Australian secondary
education business
$15 million
★ Vista Research, Inc.
▲ BusinessWeek
2008
$48 million
● Maalot, Ltd.
★ Case-Shiller® Home Price Indices
$0.4 million
● CRISIL Gas Strategies
(90% interest)
(licensing agreement)
★ Thomson Reuters databases
▲ Umbria, Inc.
▲ LinkedIn Corporation (0.45% interest)
2007
$87 million
$62 million
★ ClariFI, Inc.
★ IMAKE/ABSX
★ S&P mutual fund data business
■ Benziger
■ HotChalk, Inc. (6% interest)
■ Reading Success (reading program)
2006
$13 million
$12 million
★ Heale Financial
★ TheMarkets.com LLC (6% interest after
★ The Review of Securities Regulation
acquisition of additional 3% interest)
▲ Automotive Resources Asia, Ltd.
▲ Azteca America affiliate low-powered TV
station in Bakersfield, CA
newsletters
▲ E-Source
▲ POWER Magazine
Operating Segment Legend:
● Standard & Poor’s Ratings Services (formerly named “Standard & Poor’s” in 2010 and “Financial Services” from 2001 to 2009)
★ S&P Capital IQ/S&P Indices (formerly named “McGraw-Hill Financial” in 2010 and “Financial Services” from 2001 to 2009)
▲ Commodities & Commercial Markets (formerly named “Information & Media” from 2001 to 2010)
■ McGraw-Hill Education
◆ Corporate
58
McGraw-Hill
Financial Review
Acquisitions
2005
2004
$462 million
● CRISIL Limited (59% interest after
acquisition of additional 49% interest)
● Taiwan Ratings Corporation (51% interest
after acquisition of additional 1% interest)
★ ASSIRT Pty Limited
★ TheMarkets.com (3% interest)
★ Vista Research, Inc.
▲ Azteca America affiliate low-powered TV
stations in Colorado and San Diego
▲ J.D. Power and Associates
▲ USDTV
■ TurnLeaf Solutions
$131 million
★ Corporate Value Consulting
★ Standard & Poor’s Securities, Inc.
▲ Healthcare Information Group
$306 million
$47 million
★ Capital IQ, Inc.
★ J.J. Kenny Drake, Inc.
▲ Center for Business Intelligence (energy
■ Landoll, Frank Schaffer and related
conference business only)
■ Grow.net, Inc.
■ PRCEDU Corporation (9% interest)
2003
Divestitures
juvenile retail publishing businesses
$4 million
$503 million
▲ FriedWire, Inc.
★ S&P ComStock
◆ Rock-McGraw, Inc. (45% interest)
2002
2001
$19 million
● EA Ratings
■ Bredex Corporation
■ Clear Learning
■ Open University Press
■ Reality Based Learning
$333 million
● Charter Research Corporation
★ Corporate Value Consulting
▲ BizNet TV, Inc.
▲ Financial Times Energy
■ Frank Schaffer Publications
■ Mayfield Publishing Company
■ Uniscore, Inc.
■ Visual Education Corporation
$24 million
★ MMS International
▲ CAP
■ Lifetime Learning
$18 million
★ Data Resources Inc.
★ Rational Investors
2012 Investor Fact Book
59
Advancing Total Shareholder Value
The McGraw-Hill Companies has paid a dividend each year
since 1937 and is one of fewer than 25 companies in the
S&P 500 that has increased its dividend annually for the last
39 years. The annualized rate of $1.02 per share of common
stock includes a 2.0% increase approved by the Board in
January 2012. Reflecting the weighted impact of share
repurchases in 2011, fully-diluted shares at the end of the
fourth quarter of 2011 were approximately 283 million.
Dividends per Share of Common Stock, 2001 – 2011
$1.00
0.75
0.50
0.25
‘01
‘02
‘03
‘04
‘05
‘07
‘06
‘08
‘09
‘10
‘11
0.490 0.510 0.540 0.600 0.660 0.726 0.820 0.880 0.900 0.940 1.000
Notes: Represents annualized dividend rate per share
Adjusted for all stock splits
Share Repurchase Programs (1)
Dividend Payout
(as a percentage of current year’s earnings)
Year
$ in millions
Shares
Purchased
Diluted Weighted
Average Shares
Outstanding
2011
$1,500
34,742,871
303,645,607
2010
256
8,710,445
312,220,085
60%
45
2009
–
–
313,296,491
2008
447
10,900,000
318,687,254
2007
2,213
37,000,000
344,784,866
2006
1,540
28,400,000
366,877,769
2005
672
14,343,900
382,569,750
2004
401
10,000,000
385,823,700
2003
213
6,935,400
384,009,014
Stock Split History, 1953 – 2005
2002
196
6,409,200
389,146,638
Record Date
2001
182
6,203,400
391,745,196
2000
168
6,235,200
392,143,250
1999
174
6,463,400
1998
106
1997
30
15
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
‘09
‘10
‘11
51
35
30
31
30
30
28
35
39
35
32
Payment Date
Distribution
May 6, 2005
May 17, 2005
2-for-1
February 24, 1999
March 8, 1999
2-for-1
397,114,618
March 28, 1996
April 26, 1996
2-for-1
5,348,000
398,208,132
May 9, 1983
June 1, 1983
2-for-1
80
5,200,400
399,008,728
1996
63
5,451,600
399,483,608
1987
135
19,960,000
(1) Adjusted for all stock splits
June 30, 1967
July 17, 1967
2-for-1
March 10, 1961
March 17, 1961
3-for-1
July 25, 1956
August 8, 1956
3-for-1
July 24, 1953
August 3, 1953
2-for-1
Note: Shares repurchased are reported on a trade-date basis
MHP Debt Profile
Summary of Debt Outstanding (as of December 31, 2011)
MHP Debt Ratings (as of August 2012)
(dollars in millions)
5.375% Senior notes, due 2012
5.900% Senior notes, due 2017
6.550% Senior notes, due 2037
Total debt
Cash and equivalents & short-term investments
Net debt
60
McGraw-Hill
$
400
399
399
$ 1,198
$ 973
$ 225
Long-term debt
Commercial paper
Outlook
Moody’s
A3
P2
Negative
Fitch
AF2
Stable
Financial Review
Quarterly Stock Valuation Data
Year
Prices(1)
Quarter
MHP
MHP – Price to Earnings(2)
S&P 500 – Price to Earnings(2)
P/E Relative to S&P 500
High
Low
Close
Volume
High
Low
Close
High
Low
Close
High
Low
Close
2011
4
3
2
1
45.770
46.990
43.500
40.560
38.680
34.950
38.090
36.200
44.970
41.000
41.910
39.400
123,076,293
200,399,637
111,965,523
103,302,467
15.57
16.55
15.43
14.70
13.16
12.31
13.51
13.12
15.30
14.44
14.86
14.28
13.40
14.33
15.08
15.46
11.14
11.64
13.84
14.37
13.04
11.96
14.53
15.25
1.16
1.15
1.02
0.95
1.18
1.06
0.98
0.91
1.17
1.21
1.02
0.94
2010
4
3
2
1
39.450
33.800
36.940
36.670
32.700
27.080
26.950
32.680
36.410
33.060
28.140
35.650
131,104,512
118,300,814
221,307,328
103,543,330
14.56
12.71
14.60
14.67
12.07
10.18
10.65
13.07
13.44
12.43
11.12
14.26
15.07
14.65
16.64
17.85
13.51
12.79
14.04
15.79
15.01
14.44
14.07
17.68
0.97
0.87
0.88
0.82
0.89
0.80
0.76
0.83
0.89
0.86
0.79
0.81
2009
4
3
2
1
35.240
34.100
34.090
25.890
24.460
23.550
22.460
17.220
33.510
25.140
30.110
22.870
194,468,691
243,943,008
177,245,398
245,097,570
14.87
14.89
13.64
9.84
10.32
10.28
8.98
6.55
14.14
10.98
12.04
8.70
19.88
27.27
24.03
21.95
17.94
21.95
19.69
15.51
19.61
26.69
23.10
18.56
0.75
0.55
0.57
0.45
0.58
0.47
0.46
0.42
0.72
0.41
0.52
0.47
2008
4
3
2
1
33.120
47.130
45.610
44.760
17.150
22.000
36.170
33.910
23.190
31.610
40.120
36.950
200,117,215
153,573,747
163,545,961
184,588,816
12.36
17.01
16.00
15.22
6.40
7.94
12.69
11.53
8.65
11.41
14.08
12.57
18.56
20.26
20.65
19.17
16.48
17.07
18.24
16.37
18.24
17.99
18.35
17.23
0.67
0.84
0.77
0.79
0.39
0.47
0.70
0.70
0.47
0.63
0.77
0.73
2007
4
3
2
1
55.140
68.810
72.500
69.980
43.460
47.150
60.160
61.060
43.810
50.910
68.080
62.880
178,192,844
247,126,617
123,650,344
124,541,820
18.08
21.98
24.83
25.63
14.25
15.06
20.60
23.37
14.36
16.27
23.32
23.03
19.09
17.42
16.83
16.36
17.04
15.35
15.47
15.26
17.79
17.09
16.42
15.90
0.95
1.26
1.48
1.57
0.84
0.98
1.33
1.53
0.81
0.95
1.42
1.45
2006
4
3
2
1
69.250
58.300
58.750
59.570
57.280
48.400
47.800
46.370
68.020
58.030
50.230
57.620
76,636,900
92,639,400
121,441,400
119,198,700
26.95
22.95
23.98
25.35
22.29
19.06
19.51
19.73
26.47
22.85
20.50
24.52
16.32
15.60
16.23
16.55
15.13
14.25
14.92
15.73
16.17
15.55
15.54
16.35
1.65
1.47
1.48
1.53
1.47
1.34
1.31
1.25
1.64
1.47
1.32
1.50
2005
4
3
2
1
53.970
48.750
45.675
47.995
45.600
43.010
40.510
42.810
51.630
48.040
44.250
43.625
78,045,900
66,287,000
111,714,000
106,768,000
23.26
21.86
21.91
24.00
19.66
19.29
19.43
21.41
22.25
21.54
21.22
21.81
16.69
16.79
16.88
17.61
15.28
15.95
15.73
16.67
16.33
16.56
16.49
16.91
1.39
1.30
1.30
1.36
1.29
1.21
1.24
1.28
1.36
1.30
1.29
1.29
2004
4
3
2
1
46.055
39.885
40.670
40.185
39.425
36.415
37.825
34.550
45.770
39.845
38.285
38.070
83,969,000
74,212,200
85,443,000
97,652,000
23.74
21.50
23.11
23.64
20.32
19.63
21.49
20.32
23.59
21.48
21.75
22.39
17.94
17.66
18.52
19.95
16.11
16.44
17.32
18.98
17.91
17.25
18.36
19.39
1.32
1.22
1.25
1.18
1.26
1.19
1.24
1.07
1.32
1.25
1.18
1.15
2003
4
3
2
1
35.000
32.255
33.075
31.290
30.995
29.300
27.730
25.870
34.960
31.065
31.000
27.795
84,799,800
97,932,400
124,260,600
131,153,800
21.21
20.35
21.62
20.79
18.78
18.49
18.12
17.19
21.19
19.60
20.26
18.47
20.34
20.10
20.74
19.62
18.21
18.57
17.32
16.55
20.33
19.25
19.91
17.79
1.04
1.01
1.04
1.06
1.03
1.00
1.05
1.04
1.04
1.02
1.02
1.04
2002
4
3
2
1
33.150
32.990
34.365
34.850
27.755
25.355
28.150
29.440
30.220
30.610
29.850
34.125
120,239,200
87,467,400
78,497,800
78,760,600
22.25
23.15
25.74
27.23
18.63
17.79
21.09
23.00
20.28
21.48
22.36
26.66
20.73
22.58
27.60
30.20
16.70
17.62
22.92
27.57
19.11
18.52
23.80
29.44
1.07
1.03
0.93
0.90
1.12
1.01
0.92
0.83
1.06
1.16
0.94
0.91
2001
4
3
2
1
30.900
33.975
35.435
32.370
24.350
25.275
28.920
27.045
30.490
29.100
33.075
29.825
110,203,800
77,876,200
76,444,200
82,145,400
24.92
27.51
30.29
28.27
19.64
20.47
24.72
23.62
24.59
23.56
28.27
26.05
30.21
29.50
27.98
26.16
26.43
22.48
23.22
20.44
29.55
24.77
26.03
21.94
0.82
0.93
1.08
1.08
0.74
0.91
1.06
1.16
0.83
0.95
1.09
1.19
(1) Data adjusted for all stock splits
(2) Based on 12-month moving operating earnings per share, which excludes one-time items
Source: S&P Capital IQ
2012 Investor Fact Book
61
Items Affecting Comparability of Results
Summary of items affecting comparability
of results
2011 Revenue and operating income for the Broadcasting
Group, historically included in the Commodities & Commercial
segment, was restated as discontinued operations
•
Discontinued operations in 2011 includes a $74 million gain (net
of taxes of $48 million) from the sale of the Broadcasting Group
Income from operations before taxes includes:
•
Q4—Growth and Value Plan costs of $10 million at Corporate
and a $66 million restructuring charge, which is reflected in
operating income as follows: a $9 million charge at the
Standard & Poor’s Ratings Services segment, a $6 million
charge at the Commodities & Commercial Markets segment,
a $34 million charge at the McGraw-Hill Education segment,
and a $17 million charge at Corporate
2008 Income from operations before taxes includes a
$73 million restructuring charge, which is reflected in operating
income as follows:
(dollars in millions)
Q1
Q2
Q3
Q4
FY
S&P Ratings
$–
$ 14
$ 2
$ 6
$ 22
–
1
2
1
4
Commodities & Commercial
–
–
14
5
19
McGraw-Hill Education
–
9
5
11
25
S&P Capital IQ/S&P Indices
Corporate
Total pre-tax charges
Q4—an $11 million restructuring charge at the Commodities &
Commercial Markets segment and a $16 million charge for
subleasing excess space at the Company’s New York facilities
•
Q3—a $7 million gain on the sale of certain equity interests at
the Standard & Poor’s Ratings Services segment and a $4
million gain on the sale of McGraw-Hill Education’s Australian
secondary education business
2009 Income from operations before taxes includes:
62
•
Q4—an $11 million gain on the sale of BusinessWeek at the
Commodities & Commercial Markets segment
•
Q2—a $14 million loss on the sale of Vista Research, Inc. at
the S&P Capital IQ/S&P Indices segment and a $15 million
restructuring charge, which is reflected in operating income as
follows: a $4 million benefit at the Standard & Poor’s Ratings
Services segment, a $3 million charge at the S&P Capital IQ/
S&P Indices segment, a $4 million charge at the Commodities
& Commercial Markets segment, and a $12 million charge at
the McGraw-Hill Education segment
McGraw-Hill
–
–
3
3
$ 24
$ 23
$ 26
$ 73
2007 Income from operations before taxes includes:
•
a $44 million restructuring charge
•
a $17 million gain on the sale of the Company’s mutual fund
data business
2010 Income from operations before taxes includes:
•
–
$–
2006 Revenue and operating profit for the Commodities &
Commercial Markets segment includes deferrals of $24 million
and $21 million, respectively, due to the transformation of
Sweets from a primarily print product catalog to a bundled print
and online service
Income from operations before taxes includes:
•
a $32 million restructuring charge
•
a $136 million charge for stock compensation as a result
of a new accounting standard for share-based payments
(included in this expense is a one-time pre-tax charge of
$24 million for the elimination of the Company’s restoration
stock option program)
Financial Review
2005 Income from operations before taxes includes:
•
a $7 million gain on the sale of the Corporate Value Consulting
business at the S&P Capital IQ/S&P Indices segment
•
a $6 million loss on the sale of the Healthcare Information
Group at the Commodities & Commercial Markets segment
•
a $23 million restructuring charge
Net income reflects a $10 million increase in income taxes on
the repatriation of funds
2004 Net income reflects a non-cash benefit of $20 million as
a result of the Company’s completion of various federal, state
and local, and foreign tax audit cycles
2002 Income from operations before taxes includes a
$15 million loss on the disposition of MMS International at
the S&P Capital IQ/S&P Indices segment
2001 Income from operations before taxes includes:
•
a $9 million gain on the sale of DRI at the S&P Capital IQ/S&P
Indices segment
•
a $23 million charge for the write-down of certain assets, the
shutdown of Blue List, and the contribution of Rational
Investors
•
a $159 million charge for restructuring and asset write-downs
•
a $7 million gain on the sale of real estate
2003 Revenue and operating profit of S&P ComStock and the
juvenile retail publishing business historically included in the
S&P Capital IQ/S&P Indices and McGraw-Hill Education
segments, respectively, were restated as discontinued
operations, as follows:
•
Discontinued operations in 2004 reflect the net after-tax loss
from the operations of the juvenile retail publishing business in
January of 2004 before the sale of the business
•
Discontinued operations in 2003 include $88 million on the
divestiture of S&P ComStock and an $81 million loss on the
planned disposition of the juvenile retail publishing business,
which was subsequently sold on January 30, 2004
•
Discontinued operations in years 2002 and 2001 reflect net
after-tax earnings (loss) from the operations of S&P ComStock
and the juvenile retail publishing business
Corporate expense includes a $131 million pre-tax gain on the
sale of real estate
Operating Segment Legend:
Standard & Poor’s Ratings Services (formerly named “Standard & Poor’s” in 2010 and “Financial Services” from 2001 to 2009)
S&P Capital IQ/S&P Indices (formerly named “McGraw-Hill Financial” in 2010 and “Financial Services” from 2001 to 2009)
Commodities & Commercial Markets (formerly named “Information & Media” from 2001 to 2010)
McGraw-Hill Education
Note: Details may not sum to total due to rounding
2012 Investor Fact Book
63
Notes
64
McGraw-Hill
“Safe Harbor” Statement Under the
Private Securities Litigation Reform
Act of 1995
This document contains forward-looking
statements, including without limitation
statements relating to our businesses
and our prospects, new products, sales,
expenses, tax rates, cash flows, prepublication investments and operating
and capital requirements that are made
pursuant to the safe harbor provisions of
the Private Securities Litigation Reform
Act of 1995. These forward-looking statements are intended to provide management’s current expectations or plans for
our future operating and financial performance and are based on assumptions
management believes are reasonable at
the time they are made.
Forward-looking statements can be
identified by the use of words such as
“believe,” “expect,” “plan,” “estimate,”
“project,” “target,” “anticipate,” “intend,”
“may,” “will,” “continue” and other
words of similar meaning in connection
with a discussion of future operating or
financial performance. These statements are not guarantees of future
performance and involve certain risks,
uncertainties and assumptions that are
difficult to predict; therefore, actual outcomes and results could differ materially
from what is expected or forecasted.
These risks and uncertainties include,
among others:
• the level of funding in the education
market;
• worldwide economic, financial, political
and regulatory conditions;
• School Education Group’s level of success in adoptions and open territories;
• currency and foreign exchange volatility;
• enrollment and demographic trends;
• the effect of competitive products and
pricing;
• the strength of School Education
Group’s testing market, Higher Education, Professional and International’s
publishing markets and the impact of
technology on them;
• the level of success of new product
development and global expansion;
• the level of future cash flows;
• the levels of capital and prepublication
investments;
• income tax rates;
• restructuring charges;
• the health of debt and equity markets,
including credit quality and spreads,
the level of liquidity and future debt
issuances;
• the level of interest rates and the
strength of the capital markets in the
U.S. and abroad;
• the demand and market for debt
ratings, including collateralized debt
obligations, residential and commercial
mortgage and asset-backed securities
and related asset classes;
• the state of the credit markets and
their impact on Standard & Poor’s
Ratings and the economy in general;
• the regulatory environment affecting
Standard & Poor’s Ratings and our
other businesses;
Design by Alexander Design Associates Inc.
www.alexanderdesign.com
• the level of merger and acquisition
activity in the U.S. and abroad;
• continued investment by the construction, automotive, computer and aviation industries;
• the strength and performance of the
domestic and international automotive
markets;
• the volatility of the energy marketplace;
• and the contract value of public works,
manufacturing and single-family unit
construction.
In addition, there are certain risks and
uncertainties relating to our previously
announced Growth and Value Plan which
contemplates a separation of our education business, including, but not limited
to, the impact and possible disruption to
our operations, the timing and certainty
of completing the transaction, unanticipated developments that may delay or
negatively impact the spin-off, and the
ability of each business to operate as an
independent entity upon completion of
the spin-off. We caution readers not to
place undue reliance on forward-looking
statements.
The McGraw-Hill Companies
1221 Avenue of the Americas
New York, NY 10020-1095
investor_relations@mcgraw-hill.com
www.mcgraw-hill.com/investor_relations
August 2012
Robert P. Merritt
Vice President,
Investor Relations
chip_merritt@mcgraw-hill.com
Tel: 212.512.4321
Fax: 212.512.3840
Celeste M. Hughes
Senior Manager, Communications
and Shareholder Relations
Tel: 212.512.2192
McGraw-Hill
Investor Relations
1221 Avenue of the Americas
New York, NY 10020-1095
Tel 212 512 4321
Fax 212 512 3840
investor_relations@mcgraw-hill.com
www.mcgraw-hill.com/investor_relations