1	1Q 2007 Earnings Call April 24, 2007 Presenters: Harold McGraw III Chairman, President and CEO Robert J. Bahash Executive Vice President and CFO Donald S. Rubin Senior Vice President, Investor Relations
2	Donald S. Rubin Senior Vice President, Investor Relations The McGraw-Hill Companies
3	“Safe Harbor” Statement Under The Private Securities Litigation Reform Act of 1995 This presentation includes certain forward-looking statements about the Company’s businesses, new products, sales, expenses, tax rates, cash flows and operating and capital requirements. Such forward-looking statements include, but are not limited to: the strength and sustainability of the U.S. and global economy; Educational Publishing’s level of success in 2007 adoptions and enrollment and demographic trends; the level of educational funding; the level of education technology investments; the strength of Higher Education, Professional and International publishing markets and the impact of technology on them; the level of interest rates and the strength of the economic recovery, profit levels and the capital markets in the U.S. and abroad; the level of success of new product development and global expansion and strength of domestic and international markets; the demand and market for debt ratings, including mortgage and asset-backed securities; the regulatory environment affecting Standard & Poor’s; the level of merger and acquisition activity in the U.S. and abroad; the strength of the domestic and international advertising markets; the volatility of the energy marketplace; the contract value of public works, manufacturing and single-family unit construction; the level of political advertising; and the level of future cash flow, debt levels, product-related manufacturing expenses, pension expense, distribution expenses, postal rates, prepublication, amortization and depreciation expense, income tax rates, capital, technology, restructuring charges and other expenditures and prepublication cost investment. Actual results may differ materially from those in any forward-looking statements because any such statements involve risks and uncertainties and are subject to change based upon various important factors, including, but not limited to, worldwide economic, financial, political and regulatory conditions; currency and foreign exchange volatility; the health of capital and equity markets, including future interest rate changes; the implementation of an expanded regulatory scheme affecting Standard & Poor’s ratings and services; the level of funding in the education market (both domestically and internationally); the pace of recovery in advertising; continued investment by the construction, computer and aviation industries; the successful marketing of new products, and the effect of competitive products and pricing.
4	Harold McGraw III Chairman, President and CEO The McGraw-Hill Companies
5	A good start to achieving double-digit earnings growth in 2007 EPS 1Q 2007: $0.40, including a three-cent gain on sale of a mutual fund business in March Revenue 1Q 2007: Increased 13.7% to $1.3 billion Margin improvement in all three segments
6	Favorable economic outlook Inflation under control at 2.5% U.S. GDP growing at about 2.4% Unemployment rate holding at 4.4% David Wyss, S&P’s chief economist, believes housing starts and sales bottoming out after 30% decline Prices down 3% and will probably decline another 5% by end of year Non-commercial construction doing very well
7	Favorable economic outlook State revenues are solid Bond rates stable Federal Reserve held funds rate at 5.25% since June 2006 No change expected soon One cut to 5% possible by year-end
8	McGraw-Hill Education Financial Services Information & Media
9	Promising start at McGraw-Hill Education 1Q 2007 segment results Revenue + 5.6% to $331.7 million Operating loss Reduced by 6.6% to $90.7 million
10	Encouraging results in a seasonally slow quarter Higher Education, Professional and International Group Revenue + 11.5% to $186.9 million School Education Group Revenue - 1.2% to $144.8 million
11	School Education Group: 1Q results 1Q represents less than 10% of full year K-12 market’s results Pattern skewed in 1Q 2006 by $9 million in Texas orders that did not repeat in 2007 Closed most of gap in 1Q 1007 Key driver: March orders from North Carolina for music (K-5) and vocational, family and consumer science (6-12)
12	Positive early indicators at School Education Group Signs that our newly-integrated school team is performing effectively Strength in new adoption market starting to materialize
13	Participating in more of the addressable market in 2007 2006: Competed for about 80% of available dollars in state new adoption market 2007: We have products for virtually the entire state new adoption market Market expected to grow 10-to-15%, or to between $750 and $800 million
14	Poised for growth: State new adoption market
15	Encouraged by early feedback Positive reports from the field in key campaigns Science California South Carolina Math Texas New Mexico Music North Carolina Social studies (2^nd yr) California
16	Encouraged by early feedback Solid opportunities developing in large urban markets New York City Boston Milwaukee Washington, DC Realized substantial sales in Washington, DC K-5 science 6-12 social studies
17	Optimistic about opportunities in open territory Competing with new products K-5 science 6-12 literature New editions of Everyday Mathematics and Open Court Reading
18	Optimistic about opportunities in open territory Good early showing from Science Snapshots, new supplemental product for grades 3-5 Providing educators a classroom solution Videos to see and hear about science Students can work independently on computer Addresses multiple learning styles
19	Improved results in testing Increases in custom work for state-wide assessment programs Georgia Colorado Indiana Florida Sales of off-the-shelf test products flat in first quarter
20	HPI Group: Double-digit growth in 1Q Higher Education Very strong January; benefited from second semester ordering Solid growth in 1Q with higher education products around the world All three imprints produced solid gains in first quarter Science, Engineering and Math Business and Economics Humanities, Social Sciences and Languages
21	Providing digital solutions to the higher education market Increased demand for our digital Homework Manager product. Offered for: World languages Accounting Math Economics New online courses getting favorable initial response
22	More new digital products for medical professionals Harrison’s Practice: Our entrance into emerging patient care market Access Pharmacy: Launched in April 2007 Designed to keep pace with changing demands of pharmaceutical education Leveraging content from our classic reference texts Offers fully-integrated drug database in English and Spanish Joins Access Surgery and Access Emergency Medicine in lineup of ready-access digital resources for medical professionals More specialties to follow
23	Outlook for McGraw-Hill Education El-hi market Growth expectations in 2007 10-to-15% for state new adoption market 3-to-4% in open territory 5-to-7% industry growth We expect to outperform the industry U.S. college and university market Expect about 4% growth in 2007 We expect to outperform this market Expect margin expansion for McGraw-Hill Education segment in 2007
24	McGraw-Hill Education Financial Services Information & Media
25	Financial Services 1Q 2007 segment results Revenue +21.5% to $728.9 million Operating profit +38.3% to $348.0 million Operating margin 47.7% Includes $17.3 million pre-tax gain on sale of mutual fund data business in March
26	Many contributors to outstanding performance World liquidity extremely plentiful We continue to operate in favorable interest rate environment Spreads remain tight Investor demand for fixed income instruments is strong
27	How a diversified and resilient portfolio delivers results Both domestic and international rating revenue grew at double-digit rates with international outpacing U.S. performance Corporate and government ratings were strong Structured finance was robust again globally Products and services not tied to public new issue market grew substantially Data and information products grew rapidly Index services continue to expand
28	Outlook for Financial Services A strong start in 2007 More double-digit growth and margin expansion for balance of year, although probably not at exceptional rate of growth in 1Q
29	How a diversified and resilient portfolio delivers results Record corporate issuance in first quarter Up 43% in U.S. to $336 billion Investment-grade and high-yield both strong performers Strong merger and acquisition activity Favorable financing Demand for corporates continues unabated Insurance companies, pension funds consistent buyers High-yield market benefiting from reduction in default rate Innovation in derivatives markets attracting high-yield investors
30	How a diversified and resilient portfolio delivers results Public finance benefited from pick up in refundings and new money issuance Environment is favorable Expanding group of buyers Increase in asset allocations to higher quality investments by aging baby boomers Expect good year although volume expected to slow
31	How a diversified and resilient portfolio delivers results Structured finance: Another strong quarter despite 10.8% decline in U.S. residential mortgage-backed securities issuance (RMBS) Factors that shaped our forecast of a 10-to-15% decline in U.S. RMBS this year: Slowing housing sector Rising mortgage rates Slower housing price appreciation Fewer housing starts
32	S&P actively monitors sub-prime market When lending standards started to deteriorate in 2006 sub-prime market, S&P took action: Raised level of credit support necessary for a rating by 50% compared to deals from 2005 Despite current activity in sub-prime market, no reason to materially change our expectations on level of issuance originally anticipated for 2007
33	New issuance dollar volume in 1Q 2007 $254.1 billion is U.S. residential mortgage-backed securities issuance in 1Q 2007 Prime and Alt-A issuance increased 5.6% Sub-prime issuance declined 24.4% European RMBS had strong quarter; outlook is positive Stable economic conditions Moderate home price growth fuels demand for mortgage credit We anticipate RMBS activity in emerging markets Started 2Q with good pipeline
34	New issuance dollar volume in 1Q 2007 Commercial mortgage-backed securities (CMBS) U.S. issuance strong Saw steady improvement in Europe Drivers of U.S. CMBS issuance Strong commercial real estate fundamentals Historically low interest rates Refinancing of maturing deals Rising property values Pipeline looks good
35	New issuance dollar volume in 1Q 2007 Asset-backed securities (ABS) issuance U.S.: Credit card and student loan activity offset slump in auto loan ABS issuance Europe: Growth in 1Q; outlook is solid Drivers of European ABS issuance Small business loans Auto loans and leases Equipment leases Basel II should have positive influence on market Consumer banks restructure risk on balance sheets to adjust capital adequacy ratios
36	New issuance dollar volume in 1Q 2007 U.S. collateralized debt obligation (CDO) market up 154% in 1Q We expect slower growth rate in subsequent quarters Factored into our expectations Key market factors in 1Q Concerns about widening spreads resulting from credit quality deterioration in sub-prime market Increase in collateralized loan obligations resulting from strength in corporate loan market
37	New issuance dollar volume in 1Q 2007 Outlook for U.S. CDO market General agreement that spreads may not change or, if they do, they could widen slightly during remainder of year S&P does not expect dramatic widening of spreads unless a shock to system triggers dramatic deterioration Strong investor demand and broader acceptance of CDOs Will see more growth in Europe
38	Gains in products and services not tied to debt issuance 26.3% of ratings revenue in 1Q Bank loan ratings a key driver of growth We anticipate more growth from: Bank loan ratings Counterparty credit ratings Financial strength ratings Derivatives Risk services
39	Solid growth from products and services for equity markets Capital IQ product continues to grow rapidly Now serving more than 1,900 clients Increased subscribers for S&P’s: RatingsDirect Ratings Xpress Compustat Xpressfeed
40	Continuing to leverage index products and services 1Q: 113 ETFs linked to S&P indices 85 in U.S. and 28 outside the U.S. $170.3 billion in assets under management in ETFs based on S&P indices at end of 1Q 2007 23.7% increase compared to 1Q 2006 1Q benefited from trading of derivative contracts based on S&P indices 1Q average daily trading volume of E-mini contracts: 1,376,979
41	Outlook for Financial Services Summary More double-digit growth and margin expansion for balance of year, although probably not at exceptional rate of growth produced in 1Q
42	McGraw-Hill Education Financial Services Information & Media
43	Information & Media 1Q 2007 segment results Revenue + 4.1% to $235.9 million Operating profit $9.9 million, up from $1.7 million in 1Q 2006 Operating margin 4.2%
44	Business-to-Business Group Revenue grew 7.5% in 1Q to $212.2 million Group includes our best-known brands BusinessWeek J.D. Power and Associates Platts McGraw-Hill Construction Aviation Week Key contributors Sweets transformation and growth in Platts
45	Broadcasting Group Revenue fell 18.8% in 1Q Absence of political advertising Loss of Super Bowl Decision not to renew Oprah Winfrey Show in two markets Pacing for 2Q is off about 14%
46	Internet reshaping B2B market Making progress in digital world Transformed Sweets from a primarily print product to a bundled print and online service
47	Internet reshaping B2B market Energy market looking for better tools and real-time information Launched Platts eWindow in April 2007 New online tool to improve service to traders Growing our real-time subscription services Licensing our intellectual property for use in broader financial and futures markets Intercontinental Exchange selected Platts’ Dubai price assessment for new crude oil futures contract
48	The transformation of Information & Media BusinessWeek.com continues to improve its performance Increases in advertising and unique visitors compared to last year We continue to make investments in the product
49	The transformation of Information & Media Building communities important aspect of digital world ArchitecturalRecord.com making it easy for readers to share their work and interact with peers and editors Architects post work on the website Blogs and rating system encourage readers to evaluate projects online and in magazine
50	Outlook for Information & Media Summary Soft start in advertising, particularly at Broadcasting in non-political year Growth in online services Margin expansion
51	Summing up for The McGraw-Hill Companies
52	Outlook for The McGraw-Hill Companies Summary Encouraging indications in education Strong start in Financial Services Progress in Information & Media Margin expansion in all three segments Guidance for 2007: Double-digit earnings growth in 2007 More double-digit top- and bottom-line growth and margin expansion for balance of the year in Financial Services, although probably not at exceptional 1Q rate
53	Robert J. Bahash Executive Vice President and Chief Financial Officer The McGraw-Hill Companies
54	Accelerated stock buyback in 1Q 2007 target: 15 million shares 1Q 2007: 13.2 million shares repurchased for $842.4 million $231 million settled and funded at beginning of 2Q Balance of year: Expect to repurchase another 1.8 million shares Capacity: 6.8 million shares remaining in 2006 buyback program 45 million shares in new program authorized by Board in January 2007
55	A commitment to advancing total shareholder value Since 1996, returned $6.8 billion to MHP shareholders through dividends and share repurchases Includes approximately $915 million returned in 1Q 2007
56	Reduced fully-diluted weighted average shares outstanding (WASO) 1Q 2007: 361.5 million shares 15.8 million share decrease compared to 1Q 2006 2.7 million share decrease compared to 4Q 2006 Modest 1Q benefit from buyback of 13.2 million shares since most were bought near end of March
57	Ended 1Q in net debt position Resumed borrowing in commercial paper market to fund seasonal cash requirements 1Q 2007: $178 million net debt position vs. net cash position of $351 million at year-end 2006 As of March 31: On a gross basis, debt position is $607.5 million offset by $429.6 million in cash, primarily foreign holdings 2007: Expect a return to net surplus cash position by year end
58	Outlook for interest expense 1Q 2007: $1.2 million net interest expense 1Q 2006: MHP essentially debt free and had net interest income of $2.5 million 2Q 2007: Expect increase in interest expense Reflects commercial paper borrowings for full quarter 2007: Expect full-year interest expense in $24-26 million range Higher than previous estimate related to timing of funding costs for accelerated share repurchase program Additional interest expense relating to FIN 48
59	Revenue recognition and transformation of Sweets Transformed Sweets from a primarily print catalog into a bundled print and online service in 2006 Associated accounting change benefits year-over-year comparison for Information & Media segment 1Q 2007 results reflect: $6.5 million of revenue $5.8 million of operating profit
60	Corporate expenses 1Q 2007: Decreased $5.6 million or 13.8%, compared to a year ago Several one-time factors in 1Q 2006 influencing decline: $14.8 million charge for elimination of restoration stock option program $4.6 million gain on sale of Dubuque, Iowa facility Categories within corporate expense that increased: Business Process Management program Vacant space from downsizing Incentive compensation
61	Outlook for tax rate 1Q 2007: Effective tax rate 37.7% 50 basis point increase from prior year due to: Change to accounting for uncertain tax positions (FIN 48) Gain in connection with sale of mutual fund data business State tax audit settlement 2007: Rate for balance of year projected to be 37.5%
62	Reduced projection for prepublication investments 1Q 2007: $57.4 million, compared to $61.6 million in same period last year 2007: Now expect $310 million Down from approximately $330 million due to efficiencies, technology, global sourcing and firming up forecast
63	Growth in capital expenditures for property and equipment 1Q 2007: $22.7 million, compared to $11.6 million in same period last year Began construction on new data center Making technology investments to digitize our products and services 2007: Continue to expect $250 million
64	Outlook for non-cash charges Amortization of pre-publication costs 1Q 2007: $28.1 million, compared to $22.5 million in same period last year Ramped up publishing schedule last year in anticipation of strong el-hi adoptions 2007: Continue to expect $260 million
65	Outlook for non-cash charges Depreciation 1Q 2007: $28.9 million, compared to $27.6 million in same period last year 2007: Continue to expect $130 million, reflecting higher level of capital expenditures in 2007 and full year of depreciation from 2006 capital expenditures
66	Outlook for non-cash charges Amortization of intangibles 1Q 2007: $11.6 million, compared to $11.9 million in same period last year 2007: Continue to expect $50 million
67	1Q 2007 Earnings Call April 24, 2007 Presenters: Harold McGraw III Chairman, President and CEO Robert J. Bahash Executive Vice President and CFO Donald S. Rubin Senior Vice President, Investor Relations
68	1Q 2007 Earnings Call April 24, 2007 Replay Options (Available from April 24 – May 1) Telephone Domestic: 800-685-1235 International: +1-203-369-3419 No password required Internet Go to www.mcgraw-hill.com/investor_relations Click on the Earnings Announcement link under Investor Presentation Webcasts