1	1Q 2009 Earnings Call April 28, 2009 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 and our prospects, new products, sales, expenses, tax rates, cash flows, prepublication investments 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; the duration and depth of the current recession; Educational Publishing’s level of success in 2009 adoptions and in open territories and enrollment and demographic trends; the level of educational funding; the strength of School Education including the testing market, Higher Education, Professional and International publishing markets and the impact of technology on them; the level of interest rates and the strength of the economy, 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 collateralized debt obligations (“CDO”), residential and commercial mortgage and asset-backed securities and related asset classes; the continued difficulties in the credit markets and their impact on Standard & Poor’s and the economy in general; 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 strength and the performance of the domestic and international automotive 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, manufacturing expenses, distribution expenses, 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 debt and equity markets, including interest rates, credit quality and spreads, the level of liquidity, future debt issuances including residential and commercial mortgage-backed securities and CDOs backed by residential mortgages and related asset classes; 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, automotive, 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	MHP 1Q 2009 results EPS 1Q 2009: $0.20 Compares to $0.25 in Q1 2008 Revenue 1Q 2009: Declined 5.7% to $1.1 billion compared to same period last year 1Q is seasonally the smallest quarter of the year for MHP Most of 2009 earnings yet to be achieved
6	Controlling expenses and monitoring new federal programs 2009 priority: Cost containment Economy expected to bottom out by late summer or early fall Pace of decline has slowed and second half looks better than first half Evaluating new federal stimulus in key markets Restoring confidence to credit markets Improving outlook for education budgets
7	Financial Services McGraw-Hill Education Information & Media
8	McGraw-Hill Education: 1Q 2009 results In 1Q 2009: Seasonally slow start in el-hi market Strong second semester ordering in U.S. college and university market Foreign exchange impacted international results
9	1Q 2009 segment results at McGraw-Hill Education Revenue (5.3%) to $312.6 million School Education Group: (11.6%) to $122.6 million Higher Education, Professional and International Group: (0.7%) to $190.0 million, including the unfavorable impact of foreign exchange of $13.3 million Group grew 6.2% in constant currency Operating Loss Reduced loss by 15.7% to ($76.6 million) Operating Margin 300 basis point improvement
10	Mixed signals from this year’s education market Good signs in U.S. college market Enrollments are growing Still expect to match 3% to 4% growth in college and university market On track to benefit from counter-cyclical performance of college market Outlook more difficult to call in el-hi Difficult to gauge impact of federal stimulus plan on educational spending Without stimulus, el-hi market could decline by 15% to 20%
11	Reduced state new adoption opportunities contributing to el-hi decline Lowering state new adoption outlook for 2009 Now project market to be $550 million to $600 million Down from earlier estimate of $675 million to $725 million More than 35% decline versus last year Estimate does not reflect potential impact of federal stimulus Adjusting estimate due to reduced opportunities California and Florida Purchasing postponed for budgetary reasons
12	Stimulus funding for local districts First stimulus funding to reach local districts will be grants for: IDEA special education programs Title I programs for disadvantaged students Districts have wide discretionary control over funds McGraw-Hill Education’s nationwide outreach provides information about the grants and the MHE products and services appropriate for purchase under guidelines
13	The timeline for the new federal education stimulus package First installment released by the U.S. Department of Education on April 1 $6 billion for IDEA programs $5 billion for Title I State-level agencies can keep 4% of funds for administrative costs Remainder to be distributed in second quarter Second round of IDEA and Title I grants to be distributed in July $6 billion for IDEA programs $5 billion for Title I
14	The timeline for the new federal education stimulus package Expect more clarity on $53.6 billion Fiscal Stabilization Fund in late 2Q Fund helps states restore cuts to education budgets Primary focus is to save teaching jobs May also be used for instructional materials and assessment programs First allocation: $32.5 billion will be distributed on state-by-state basis Stabilization grants come with stringent reporting requirements Second allocation: Distributed to states only after first round has been evaluated and approved
15	The timeline for the new federal education stimulus package Hard to predict impact: State funding and timelines vary 2Q: Could see incremental sales funded by IDEA and Title I grants 3Q: Grants likely to have greatest impact We are well positioned to capture significant share of instructional and assessment spending in special education and Title I markets 46 states start new fiscal year on July 1 New state education budgets taking shape now Will play major role in volume of purchasing in 2H 2009
16	New federal funding augments the stimulus package In addition to the stimulus package, omnibus spending bill raised the Dept. of Education’s budget for discretionary programs by 7% IDEA funding: Increased 5.5% to $11.5 billion Title I funding: Increased 4.3% to $14.5 billion Long-term educational priorities create favorable environment for educational publishers
17	Emphasis on education improves outlook for the market Federal assistance will help relieve financial stress at state and local education agencies Proposed commitment should enlarge early childhood education market; we are well positioned Secretary Duncan promises broader support for primary-grade reading Emphasis on college and workforce readiness will help revitalize areas of the secondary curriculum Investing in education is essential for U.S. to remain globally competitive
18	A slow start for el-hi market in 1Q Residual and supplemental purchases are the majority of first quarter sales for el-hi industry and School Education Group Categories have been under pressure for several months North Carolina is the only adoption state to place substantial orders in Q1 State postponed 6-12 math purchasing this year and purchased only K-5 materials We are not taking significant share in this adoption Success last year made 1Q 2009’s year-over-year comparisons more difficult
19	Reduced opportunities for 2009 in California and Florida California and Florida represent the largest state new adoption opportunities in 2009 California: First-year K-8 reading and literature, and second-year K-8 math Florida: First-year 6-12 reading and literature Market softening in both states Nearly 80% of the districts are postponing purchases until next year California districts receiving waivers to postpone second year math purchases until a third year Legislatures in both states are permitting use of 2009 instructional material allocations for other educational purposes Impossible to predict the impact of stimulus package on postponement
20	Goal: Capture 30% of state new adoption market in 2009 Competitive in state new adoptions: Reading in Georgia Science in Tennessee Social Studies in Indiana Math in South Carolina, Kentucky, and Oregon Expect to capture meaningful shares of available business in Florida and California
21	2010: State new adoption market could hit $1 billion Keys to 2010 market: Texas K-12 reading, literature, and language arts Fluid situation, but both Governor and Senate support full funding with federal stimulus funds Florida K-12 math Not currently aligned with new standards in summative testing Attempts to delay adoption have been turned back California reading Normally spends 40% in first year and 40% in second year Only spent 20% to 25% in first-year adoption in 2009 Expect to spend 40% in second year (2010) plus incremental purchasing Promising state new adoption market in 2011 2011 opportunity could top $1 billion
22	"We continue to make progress..." We continue to make progress with: Acuity: Formative assessment program LAS Links: Assessment program for English-language learners TABE CLAS-E: Measures English-language proficiency in adults Recently won its first statewide adoption in Arizona Market signaling that federal stimulus funds will be a plus for testing Some states planning to keep programs in place or resume programs that had been cancelled Acuity and LAS Links should benefit from renewed focus on real-time assessments and the availability of stimulus money Both products fit well within federal guidelines for Title I and IDEA spending
23	U.S. college and university market: Poised for more growth Strong 1Q 2009 sales All major disciplines showed improvement Greatest gain in for-profit market 1Q benefited from orders that shifted from December into early 2009 Market poised for more growth this year Reports of increased U.S. enrollments Largest increases occurring in public colleges, particularly community colleges
24	Federal stimulus funding will help college students meet expenses New provisions: Increase in Pell grant award: Maximum increased from $4,731 to $5,350 Additional support for work-study programs $2,500 tax credit for tuition and related expenses—including course materials With Department of Education approval, states can use part of Fiscal Stabilization Fund grants to restore higher education budget cuts
25	Outlook for professional market Soft economy led retailers to reduce inventory and limit new orders Digital products still growing Double-digit gains in higher education and professional markets
26	Outlook for McGraw-Hill Education in 2009 Summary Before benefits from federal stimulus package 15% to 20% decline in el-hi market 3% to 4% growth in U.S. higher education market New guidance for segment Revenue: Now projecting 7% to 8% decline versus previous guidance of a low single-digit decrease Operating margin: Maintaining 300 to 400 basis point decline, excluding 2008 restructuring charges Implies low single-digit decline in expenses and an operating margin of 9.0% to 10.0%
27	Financial Services McGraw-Hill Education Information & Media
28	Financial Services Key factors in first quarter performance: Surging investment-grade corporate issuance, primarily in industrial sector Weakness in structured finance Modest growth in S&P Investment Services
29	1Q 2009 results at Financial Services Revenue (5.3%) to $610.2 million S&P Credit Market Services declined 8.4% to $391.4 million S&P Investment Services increased 0.8% to $218.8 million Operating Profit (12.3%) to $231.6 million Operating Margin 38.0%
30	Financial Services: Taking steps to build market confidence Conditions in bond market remain unsettled Pick up in 1Q corporate issuance may be sign of confidence returning to credit markets Increased corporate activity and government-led programs are welcomed developments for both issuers and investors U.S. government programs now cover much of the funding mix in financial markets Commercial paper Term unsecured debts Deposits Secured borrowing at banks and broker-dealers Equity capital
31	Government actions to help restore market confidence Government programs include TALF, TARP and TLGP Referred to as “the acronym credit market relief program” Only a modest impact on S&P Programs to help asset-backed commercial paper markets Effort to stabilize short end of market Extended through October Have generally been effective Stabilizing short end of market should help stability of longer-term credits
32	No increase in asset-backed commercial paper issuance U.S. ABCP Outstanding Quarterly Trend
33	Impact of government programs TALF (Term Asset-Backed Securities Loan Facility) produced modest activity in Q1 Large deals subject to fee caps S&P paid less than 1 basis point for rating $7 billion of TALF-eligible securities in Q1 Bigger round of funding for TALF programs is shaping up in May FDIC’s TLGP (Temporary Liquid Guaranty Program) encouraged issuance of rated deals based on government guarantees
34	Turbulence in credit markets has carried into first quarter of 2009
35	Key growth factors for high-grade bond issuance In U.S. market: Pent-up investor appetite for yield A rebound in merger and acquisition activity Refinancing as many corporations addressed maturing long-term debt Narrowing of spreads since December
36	Key growth factors for high-grade bond issuance In European market: Low short-term interest rates Aversion to equity risk Europe produced a record quarter of $220 billion in issuance for industrials
37	Liquidity is key in today’s market Companies with strong balance sheets can borrow at reasonable rates Market not open to everyone Lower rated companies must pay steep rates to borrow; others shut out completely Outlook for industrial market: Issuers and investors remain cautious Issuance expected to remain lumpy until stability returns to financial system
38	Liquidity is key in today’s market Continued pressure on banks and financial institutions Banks are deleveraging balance sheets and shrinking liabilities Expect modest lending growth despite pressures on banks Government aid packages are encouraging banks to support local economies LIBOR spreads remain the relevant cost-of-funds benchmark LIBOR rates have stabilized in recent months
39	Liquidity is key in today’s market U.S. speculative-grade issuance jumped 55% in 1Q 2009 There were not many deals Expect speculative-grade issuance to remain limited
40	Liquidity is key in today’s market Public finance tends to be countercyclical to U.S. economy Fundamentals point to another good year in issuance, assuming interest rates remain relatively low
41	Liquidity is key in today’s market Rating requests for state and local governments continue at steady pace Issuance in 2Q 2008 was largest in muni history so immediate comparisons are challenging
42	Turbulence in credit markets has carried into first quarter of 2009
43	Unsettled conditions in credit markets Transaction revenue down 18.3% in 1Q 2009 Transaction now includes: Bank loan ratings Corporate credit estimates Publicly-issued debt
44	Building a diverse, resilient revenue stream for Financial Services Non-transaction revenue: 1Q 2009: Down 3.8% Represented 72.0% of ratings revenue Includes annual contracts, surveillance fees and subscriptions Key factors in 1Q revenue decline: Foreign exchange and reduced fees on cancelled transactions Expect slight decline in 2009 versus previous guidance of 1% to 2% growth
45	Outlook for transaction revenue Maintaining guidance of 10% to 12% decline in 2009 Comparisons get easier in second half Foreign exchange comparisons less challenging S&P Credit Market Services international revenue declined by 13.0% in 1Q, including the unfavorable impact of foreign exchange of $18.6 million Off only 3.9% in constant currency Comparable to 4.2% decline in S&P Credit Market Services’ domestic revenue For S&P Credit Market Services: Expect low single-digit decline in revenue versus our previous guidance of slight decline
46	Outlook for S&P Investment Services Revenue at S&P Investment Services grew by 0.8% in 1Q Gains at Index Services and Capital IQ offset softness in investment research products and less demand for European fund ratings Forecast for 2009: Single-digit revenue growth versus previous guidance of high single-digit growth for the year Revenue declining for traditional S&P reference products, industry surveys and directories
47	Data and information benefiting Investment Services Capital IQ added customers in 1Q despite recessionary climate Now serves over 2,700 clients Nearly a 15.0% increase in customers over prior year; up 1.5% since end of 2008
48	Growth, resiliency in Index Services 1Q 2009 trends: 24.4% decrease to $158.6 billion in assets under management in exchange-traded funds Positive signs Sales of data, increases in license fees for mutual funds, and growth of over-the-counter derivatives all contributed to improvement
49	Finding new ways to grow our index business Signed new licensing agreement with Source to create 22 exchange-traded commodity products based on S&P GSCI index S&P GSCI widely recognized as leading measure of general commodity price movements and inflation in world economy Contains 24 commodities from all commodity sectors Exchange-traded products will be traded on Deutsche Bourse
50	The regulatory scene: Signs of progress Hard work continues on the regulatory front Good progress, but more to do New SEC rules governing rating agencies took effect on April 10th S&P has implemented policies to comply, including: Further separating staff with analytical and commercial responsibilities Confirming long-standing policies and procedures that employees do not recommend how transactions should be structured to achieve a desired rating
51	The regulatory scene: Creating a global framework Ongoing dialogue with policymakers, regulators, and market participants S&P recently published a paper, “Toward a Global Regulatory Framework for Credit Ratings,” laying out a regulatory framework for rating agencies Available on S&P’s Website at www.standardandpoors.com
52	Business models: A choice for market participants New S&P white paper focuses on key requirements for business model Transparency Prevention of conflicts Quality Breadth of coverage Market scrutiny Investor choice Find a copy on S&P’s Website at www.standardandpoors.com
53	The timeline on new regulations in Europe European Union recently moved to finalize its approach to registration and supervision of credit rating agencies Directly binding on all the European Union member states Final text approved on April 23 Not clear when the regulation will actually take effect, but could be as early as July After that, credit rating agencies will have nine months to comply with the provisions and apply for registration
54	The timeline on new regulations in Europe Political sign-off by European finance ministers probably taking place on May 5 with final sign-off in October Within six months after regulations are enacted, the Committee of European Regulators (CESR) will issue guidelines Include application process and treatment of ratings issued outside European Union CESR has nine months to issue enforcement and penalty guidelines
55	Assessing new regulations in Europe More will be required of S&P and other credit rating agencies issuing ratings New regulation is manageable and represents a level playing field The European Commission’s work will continue Within three years of the regulation coming into force it: Must assess what effect regulation is having on credit rating agency competition Must determine appropriateness of issuer paid model The Commission will also look at ways to enhance CESR’s status to give it a fuller pan-European supervisory capability
56	New developments on litigation front Entering new phase on litigation front Oral argument on May 13 relating to our motion to dismiss the Oddo Lawsuit Oral arguments in connection with motions to dismiss other pending cases will be scheduled over next several months
57	The legal scene: Update on pending lawsuits Lawsuits fall into three broad categories: Underwriter claims based on the Securities Act of 1933 Includes class actions by purchasers of subprime RMBS securities rated by S&P and case involving Fannie Mae ratings We intend to seek dismissals for all actions McGraw-Hill shareholder claims Includes a class action under Section 10(b) of the Securities Exchange Act—referred to as the Reese case A motion to dismiss this action has been filed
58	The legal scene: Update on pending lawsuits State law claims Fraud relating to S&P’s ratings of a variety of securities, including SIVs, SIV-Lites, CDOs and Lehman Brothers debt Moving to dismiss allegations In Oddo Asset Management case Other cases include a complaint filed with HUD and actions filed in Israel and Italy relating to Lehman Brothers We are currently preparing our legal responses
59	The legal scene: Setting the record straight S&P not immune from litigation or legal liability Always subject to potential liability under fraud provisions of federal securities law Ongoing regulatory scrutiny by SEC Critics’ comments on immunity and liability do not match the facts
60	Continue to assess the legal risk as low We feel strongly that no new or currently proposed legislation, regulation or judicial determination would adversely impact our financial condition or results of operations
61	2009 outlook for Financial Services Summary Change in revenue guidance No change in operating margin Low single-digit revenue decline in S&P Credit Market Services Single-digit revenue growth in S&P Investment Services The segment in 2009: Slight decline in revenue Margin decline of 250 to 300 basis points, excluding 2008 restructuring charges Low single-digit growth in expenses 38% implied operating margin
62	Financial Services McGraw-Hill Education Information & Media
63	Information & Media: 1Q 2009 results Key factors in 1Q performance: Decline in advertising Strength in global energy markets Revenue deferral
64	1Q 2009 segment results at Information & Media Revenue (7.4%) to $225.4 million Business-to-Business Group: (5.7%) to $207.1 million Broadcasting Group: (22.9%) to $18.3 million Operating Profit (76.4%) to $2.8 million Operating Margin 360 basis point decline
65	Factors influencing 1Q results Revenue deferral at J.D. Power and Associates $4.7 million in revenue and $2.3 million in operating profit was deferred and will be recognized ratably over a 12-month service period Advertising soft at BusinessWeek and our construction and aviation publications BusinessWeek ad pages down 39.8% with two fewer issues in first quarter
66	Factors influencing 1Q results Platts: More solid results Critical services for oil, natural gas, and power markets New subscribers for Platts’ real-time news, market analysis, and price assessments Growing demand for Platts’ Dispatch Provides end-of-day price assessments, third-party data and a rolling 45-day historical database
67	Factors influencing 1Q results Turmoil in automotive market affects J.D. Power and Broadcasting Automotive advertising down Contributed to decrease in local and national TV advertising Tough comparisons due to absence of political advertising in non-election year at Broadcasting
68	Outlook for 2009: Information & Media Summary: Revenue: Now expect 5% to 6% decline versus previous guidance of a low single-digit decrease Operating margin: Maintaining previous guidance of a 200 to 300 basis point decline, excluding 2008 restructuring charges
69	Outlook for 2009: The McGraw-Hill Companies Summary: Revenue to decline 4% to 5% versus previous guidance of 1% to 2% decrease Maintaining guidance for earnings per share in $2.20 to $2.30 range Based on tight expense controls 2009 operating margins reflect new SFAS 160 accounting standard
70	Robert J. Bahash Executive Vice President and Chief Financial Officer The McGraw-Hill Companies
71	Cost control a key to revised 2009 guidance Reducing revenue expectations Maintaining original EPS guidance of $2.20 to $2.30 Keeping a firm grip on expenses Consolidated expenses down 4% in 1Q 2009
72	Measuring impact of foreign exchange Foreign exchange: Reduced 1Q 2009 revenue by $37.4 million Cut growth by three percentage points Benefited year-over-year expense comparisons by $49.5 million and pre-tax income by $12.1 million Why different top and bottom line outcomes Revenue: Billings are primarily in U.S. dollars and Euros Costs: Significant expenses are denominated in non-U.S. dollars Expect impact of foreign exchange on revenue and expenses to lessen in second half of 2009
73	Impact of cost containment on Q1 expenses In constant currency, 1Q 2009 consolidated expenses roughly flat year-over-year Continued investment mitigated by: Savings at all three segments as a result of 2007 and 2008 restructuring actions Continued cost containment Lower expenses at McGraw-Hill Education, some of which is timing related
74	Measuring the impact of incentive compensation 1Q 2009: Benefited from slight year-over-year decline in incentive compensation 2H 2009: Comparisons more challenging because long-term and short-term accruals were reduced in latter part of 2008
75	Outlook for expenses at McGraw-Hill Education 1Q 2009: Segment’s expenses down 7.6% year-over-year Skewed by timing of sales and marketing expenses, some of which will shift into 2Q and 3Q Maintaining previous margin guidance of 300 to 400 basis point decline, excluding 2008 restructuring charges
76	Outlook for expenses at McGraw-Hill Education FY 2009: Continued expense reductions Now expect low-single digit decline for the full year versus previous guidance of roughly flat expenses Segment will benefit from: Restructuring actions taken in 2007 and 2008 Absence of data center migration costs Lower marketing costs due to reduced opportunities in adoption market Reduced variable costs as a result of reduced revenue opportunities Benefits partially offset by: Higher plant amortization in 2009 Increased investments at Higher Education
77	2Q revenue outlook at McGraw-Hill School Education Group Revenue comparisons for School Education Group will be challenging in 2Q 2009 2Q 2008: Ordering accelerated and SEG’s revenue grew 6.9% We do not expect pattern to repeat this year
78	New revenue guidance for S&P Credit Market Services S&P Credit Market Services (CMS): Low single-digit decline in 2009 revenue versus previous guidance of a slight decline CMS’ transaction revenue: Maintaining guidance of 10% to 12% decline 1Q 2009: Declined 18.3% 2H 2009: Comparisons get easier
79	New revenue guidance for S&P Credit Market Services CMS’ non-transaction revenue: Slight decline versus previous guidance of 1% to 2% growth 1Q 2009: 3.8% decline driven by impact of foreign exchange and reduction in fees for cancelled transactions. Fewer fees in 2009 than last year 2008 fees: Larger in first half of year than second half; largest amount earned in 2Q 2009: Slightly lower growth projections for surveillance and subscription fees
80	A revised measure of S&P transaction revenue S&P Credit Market Services reclassified bank loan ratings and corporate credit estimates from non-transaction to transaction Creates more accurate view of transaction revenue Previously, transaction revenue limited to public new issuance
81	New revenue guidance for S&P Investment Services S&P Investment Services: Single-digit growth in 2009 revenue versus previous guidance of a high single-digit increase Index Services and Capital IQ continue to perform strongly Softening in Investment Research, including equity research outsourcing 1Q 2009 revenue: Grew slightly but experienced small sequential decline CRISIL and European operations adversely impacted by strong U.S. dollar Results also impacted by divestiture of CRISIL’s Gas Strategies Group last year
82	Outlook for expenses and operating margin at Financial Services Maintaining margin guidance of a 250 to 300 basis point decline, excluding 2008 restructuring Implies low single-digit increase in expenses versus previous guidance of 6% growth 1Q 2009: Expenses down 0.4% year-over-year Adjusting for currency, expenses increased $25.9 million, or 6.8%, driven by: Full impact of 2008 hires, primarily in India Continued investments in fast-growing businesses though at a reduced pace Increased compliance and regulatory costs Partially offset by benefits of restructuring actions
83	2009 guidance for Information & Media 2009 revenue: 5% to 6% decline versus previous guidance of low single-digit decrease Results will be adversely impacted by non-cash accounting change at J.D. Power 1Q: $4.7 million decline in revenue and $2.3 million decline in profit 2009: Expect $15 million decline in revenue and $10 million decline in profit Operating margin: Maintaining earlier forecast of 200 to 300 basis point decline, excluding 2008 restructuring charges Expenses: Low single-digit decline versus previous guidance of virtually no growth
84	1Q: New accounting standard for noncontrolling interests Statement of Financial Accounting Standards No. 160 resulted in reclassification of minority interest Previously minority interest recorded in segment operating profit Under SFAS 160, MHP now separately reports net income attributable to noncontrolling interests as a new line below net income No impact on earnings per share or margin guidance Modestly impacts operating profit margins for McGraw-Hill Education and Financial Services segments
85	2009 outlook for corporate expenses 1Q 2009: $33.4 million, versus $33.9 million for same period last year 2009: Still expect increase of $25 million to $30 million compared to 2008 Largely reflects increased stock-based and short-term incentive compensation
86	Changes in the effective tax rate for 2009 Previous guidance for 2009 tax rate: Approximately 37.0% versus 37.5% in 2008 Drivers of lower tax rate remain the same: Higher growth in international operations has a favorable impact on rate Recently formed Standard & Poor’s Financial Services LLC, a Delaware limited liability company, to operate most of U.S. S&P businesses In addition to operational benefits, we expect new structure to be more tax efficient Due to impact of SFAS 160, 2008 tax rate was recalculated as 36.9% Still expect a 50 basis point decline, which will result in rate of approximately 36.4% for 2009
87	2009 guidance for free cash flow 1Q 2009: Free cash flow improved by $207 million versus prior year Free cash flow is generally negative in first quarter due to seasonality of businesses 1Q 2009 free cash outflow was substantially lower than prior year due to significant reduction in incentive compensation payments and more favorable working capital comparisons
88	2009 guidance for free cash flow 2009: Still expect free cash flow in $430 to $450 million range Approximately equal to 2008, despite lower profits, due to easier working capital comparisons and prudent investments
89	Updated outlook for pension funding requirements in 2009 Potential for pension plan contributions has not been factored into free cash flow guidance U.S. plan is underfunded due to significant market declines in 2008 Will follow guidance from government agencies on contribution formula changes May have no funding requirements in 2009 If funding is required, could be up to $30 million Lower than previous guidance of $30 million to $50 million Payable in second half of year
90	Measuring liquidity at MHP Cash on the balance sheet Commercial paper program in place Supported by back-up credit facility MHP can access commercial paper market at reasonable rates
91	MHP’s debt position at end of 1Q Gross debt : $1.36 billion at the end of March $1.2 billion in unsecured senior notes $159.9 million in commercial paper outstanding Offset by $496.8 million in cash, primarily foreign holdings Net debt: Ended 1Q at $860.8 million, up from $796.0 million at year end Increase is due to seasonal cash requirements in 1Q 2009
92	Diluted weighted average shares outstanding (WASO) 1Q 2009: 312.0 million shares 11.4 million share decrease compared to 1Q 2008 Primarily due to 2008 share repurchases and to lesser extent, decline in our stock price Roughly flat compared to 4Q 2008 Fully-diluted shares at end of 1Q 2009 was approximately 312 million shares
93	Outlook for net interest expense 1Q 2009: $20.6 million net interest expense Compared to $17.8 million in 1Q 2008 2009: Still expect it to be roughly comparable to 2008
94	Outlook for prepublication investments in 2009 1Q 2009: $42.7 million, down $23.9 million compared to 1Q 2008 2009: Still expect $225 million Factors for lower level versus 2008: Reduced revenue opportunities in 2009 Prudent investments Continued offshoring benefits
95	Outlook for capital expenditures for property and equipment in 2009 1Q 2009: $8.0 million, compared to $23.6 million in same period last year 1Q 2008 included expenditures related to data center 2009: Continue to expect approximately $90 million
96	Outlook for non-cash items Amortization of prepublication costs 1Q 2009: $27.3 million, approximately $1 million lower than same period last year 2009: Lowering to a range of $275 million to $280 million Original forecast was $285 million
97	Outlook for non-cash items Depreciation 1Q 2009: $29.4 million, $1.9 million higher than same period last year 2009: Still expect approximately $130 million
98	Outlook for non-cash items Amortization of intangibles 1Q 2009: $14.2 million Flat compared to same period last year 2009: Still expect approximately $55 million
99	Outlook for unearned revenue in 2009 End of 1Q 2009: $1.1 billion Roughly flat year-over-year, including the unfavorable impact of foreign exchange of $42.5 million Grew 3.6% at constant foreign currency exchange rates Financial Services represents 74.1% of MHP’s unearned revenue 2009: Given lower revenue guidance, now expect minimal growth versus original forecast of low single-digit year-over-year growth
100	1Q 2009 Earnings Call April 28, 2009 Presenters: Harold McGraw III Chairman, President and CEO Robert J. Bahash Executive Vice President and CFO Donald S. Rubin Senior Vice President, Investor Relations
101	1Q 2009 Earnings Call April 28, 2009 Replay Options Internet replay available for one year Go to www.mcgraw-hill.com/investor_relations Click on the Earnings Announcement link under Investor Presentation Webcasts Telephone replay available through May 28, 2009 Domestic: 800-756-0529 International: +1-402-998-0771 No password required