McGraw Hill Financial, Inc. (MHFI)

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McGraw-Hill Companies Inc. (MHFI)

Barclay's Americas Select Franchise Conference

May 22, 2013 10:00 am ET


John F. Callahan - Chief Financial Officer and Executive Vice President


Manav Patnaik - Barclays Capital, Research Division


Manav Patnaik - Barclays Capital, Research Division

All right. Good afternoon, everybody. Thank you for being here. I guess it's the last one in this room, so we have the homestretch. I'm Manav Patnaik again, Barclays' information services analyst. I cover McGraw Hill Financial, I guess, ticker MHFI now. I'd like to thank Jack and Chip as well, he's back there, for coming to the conference.

As a brief introduction, Jack Callahan is the EVP and CFO of McGraw Hill Financial. He joined in December 2010. He has a solid background in financials ranging from Dean Foods to PepsiCo to GE, McKinsey. He's got a pretty solid background there. And also, for those of you who don't know Chip Merritt, who's sitting way at the back there, he's the Head of Investor Relations, and he recently joined as well. But he's been very helpful in the outreach.

So with that, I'll just let Jack run through his presentation and then we'll have some time for Q&A later.

John F. Callahan

Thank you, Manav. Good afternoon. It's a pleasure to be with you today and have the chance to talk about McGraw Hill Financial. And as Manav mentioned, if you don't know Chip, please use this as an opportunity to get to know him.

Before I get going, I do want to remind you that as we go through this, there are some historical information that we have adjusted. What we've done is we had significant onetime costs as it related to the separation of McGraw-Hill Education from McGraw Hill Financial. So they've been excluded from these numbers, and they're very well detailed in all our filings. And as always, I do need to remind you that I'm likely to have 1 or 2 forward-looking statements, and I do caution you on that.

Today, I was reflecting on getting ready for this, and it was -- today is a little bit of a landmark event in going to speak to investors, at least at a conference like this. This is the first time we're actually going as McGraw Hill Financial. Shareholders approved the change in name just 3 weeks ago at our annual meeting. But I hope, as I go through this, you realize that more is changing than just -- we divested Education, and we have a name change. There's a lot underway. I think we're already starting to see some benefits of a more focused, more streamlined portfolio, I think benefits we'll see further in the future. We believe there's a number of great trends out there that are going to continue to propel our future growth.

And I do want to address the fact that we are addressing a fair amount of cash and give you some sense of how we're thinking about what we're doing to both grow the business and, at the same time, return some to shareholders. And as I go through this, give you a brief overview of the great portfolio that we've had.

In the last few years, there have been a lot of work. And Manav mentioned I joined in late 2010. It's been a busy time. We've worked a lot to sort of realign our portfolio. So in 2011, we sold our Broadcasting business to Scripps, a much better strategic owner for the business. And more recently, we completed the sale of McGraw-Hill Education to private equity earlier this year.

The asset sales certainly have strengthened our balance sheet, have supported a step-up in cash that we've returned to shareholders. But most importantly, the McGraw Hill Financial portfolio is now focused and well positioned to sustain growth. Our strong start in 2013 is consistent with these recent trends and gives us great confidence on our full year guidance of high-single-digit growth. And I would just comment on this case that the numbers here underneath -- of McGraw Hill Financial are restated just to exclude the impact of Education.

Now that separation is complete, we are now intent on delivering on the promise of McGraw Hill Financial based on our vision of building the leading brands and ratings, benchmarks and analytics. We are introducing a common brand architecture that links together our portfolio of compelling brands. And last week, we had an opportunity to visit the New York Stock Exchange to mark the transition to a new stock ticker, MHFI. Our previous ticker was MHP, McGraw-Hill Publishing. Publishing is certainly part of the rich heritage of this company, 125 years old, but it's not part of our future.

We have a broad portfolio of terrific businesses. Clearly, S&P is the anchor, but we are much more than just a ratings business. S&P Dow Jones Indices, S&P Capital IQ and our Commodities & Commercial businesses are all valuable franchises with great growth potential. And increasingly, we are leveraging synergies across these businesses in areas such as data management, technology, talent management and administrative functions.

Perhaps one of the greatest synergies across the business is the ongoing build out of our global network. Today, about 40% of McGraw Hill Financial is outside of North America, and it is our intent to accelerate that growth. To that end, last year, every single one of the acquisitions we completed last year was outside of the United States. All of our businesses tend to be colocated in common locations around the globe. As we build out this global network of offices, the businesses are increasingly leveraging each other to understand specific market needs, enhance local reputations and work with leading customers.

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