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Executives

Robert S. Merritt - Vice President of Investor Relations

Harold Whittlesey McGraw - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

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

Kenneth M. Vittor - Executive Vice President and General Counsel

Douglas L. Peterson - President

Analysts

William G. Bird - Lazard Capital Markets LLC, Research Division

Manav Patnaik - Barclays Capital, Research Division

Peter P. Appert - Piper Jaffray Companies, Research Division

Craig Huber

William A. Warmington - Raymond James & Associates, Inc., Research Division

David Reynolds - Jefferies & Company, Inc., Research Division

The McGraw-Hill Companies (MHP) Q4 2012 Earnings Call February 12, 2013 8:30 AM ET

Operator

Good morning, and welcome to The McGraw-Hill Companies' Conference Call. I'd like to inform you that this call is being recorded for broadcast. [Operator Instructions] To access the webcast and slides, go to www.mcgraw-hill.com and click on the link for the fourth quarter earnings webcast. [Operator Instructions] I'd now like to introduce Mr. Chip Merritt, Vice President of Investor Relations for The McGraw-Hill Companies. Sir, you may begin.

Robert S. Merritt

Good morning. Thank you for joining us this morning for McGraw-Hill Companies' Fourth Quarter and Full Year 2012 Earnings Call. This morning, we issued a news release with our results. I should comment, there was a bit of a confusion with those -- with some of the press reports coming out of that. I want to remind all the listeners that the McGraw-Hill Education business was reclassified as a discontinued operation. What that means is you're not going to see McGraw-Hill Education revenue in the revenue line. You see that the ultimate results, if you will, the profitability of McGraw-Hill Education, in one line, entitled discontinued operations. So hopefully, the media can straighten that out.

In today's earnings release and during the conference call, we are providing adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the corporation's operating performance between periods and to view the corporation's business from the same perspective as management's. The earnings release contains exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with U.S. GAAP. The results also reflect the reclassification of McGraw-Hill Education as a discontinued operation, as I mentioned a moment ago.

Before we begin, I need to provide certain cautionary remarks about forward-looking statements. Except for historical information, the matters discussed in the teleconference may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates and descriptions of future events. Any such statements are based on current expectations and current economic conditions and subject to the risks and uncertainties that may cause actual results to differ materially from results anticipated in those forward-looking statements. In this regard, we direct listeners to the cautionary statements contained in our Form 10-Ks, 10-Qs and other periodic reports filed with the U.S. Securities and Exchange Commission.

We are aware that we do have some media representatives with us on the call. However, this call is intended for investors, and we ask that questions from the media be directed to Jason Feuchtwanger in our New York office at (212) 512-3151 subsequent to this call.

Now I would like to turn the call over to Harold McGraw III, Chairman, President and CEO of The McGraw-Hill Companies. Terry?

Harold Whittlesey McGraw

Thank you, Chip. Good morning, everyone. Thanks for being with us, and welcome to today's conference call. While we're excited about sharing our Growth and Value Plan accomplishments and the strong financial results delivered both in the fourth quarter and in the full year, we recognize that investors are keenly interested in receiving a thorough update concerning recent legal development. Therefore, the normal sections that Jack Callahan, our Chief Financial Officer, and I cover have been somewhat abbreviated.

So in addition to Jack Callahan joining me on today's call, you will also hear presentations from Ken Vittor, our General Counsel; and Doug Peterson, the President of Standard & Poor's Ratings. Ken will discuss the civil complaint we received last week from the Department of Justice and demonstrate that this and other state claims are entirely without factual or legal merit, and we will vigorously defend our company as we have successfully defended against more than 40 other financial crisis-related cases. Doug Peterson will then discuss the ongoing changes that we have made and will continue to make to ensure the highest quality ratings. And at the end of the call, I will make a few summary remarks and then open it up for questions.

So let's begin. In September of 2011, we introduced our Growth and Value Plan. Today, we are pleased to discuss the many achievements of this plan. There were 4 principal components of the Growth and Value Plan. First, I told you that we would transform McGraw-Hill from a holding company into 2 focused industry-leading stand-alone operating companies: McGraw-Hill Financial, focused on global capital and commodity and commercial market; and McGraw-Hill Education, focused on educational services and digital learning.

For McGraw-Hill Education, we found a more attractive path forward for our shareowners in the form of a sale to Apollo Global Management for $2.5 billion. All of the government approvals have been received and Apollo is securing their financing, and we expect the deal to close in the first quarter.

Second, we discussed stepping up our focus on reducing costs and committed to reducing a run rate cost by at least $100 million. Today, we're proud to announce that we have achieved $175 million in yearly savings. The principal components of the savings come from redesigning the employee benefits plans, including a freeze of the U.S. benefit plan; select headcount restructurings of approximately 670 employees within McGraw-Hill Financial and approximately 10% of the McGraw-Hill Education workforce; and the migration of numerous accounting, IT and human resource work streams to world-class partners. While McGraw-Hill Financial will end up with some stranded costs, we estimate that approximately 1/3 of the savings will be realized by McGraw-Hill Financial after taking into account these additional stranded costs.

Third, we committed to accelerating the pace of capital return to shareholders. Here, again, we delivered on our commitment. During 2011 and 2012, we spent $1.8 billion and repurchased 41.5 million shares. And importantly, we plan to continue our share repurchase activity in 2013, and Jack Callahan will discuss that in just a moment. We also returned approximately $1.3 billion to shareholders through dividends. Along with our normal quarterly dividend, we distributed a special dividend of $2.50 per share in December of 2012 or approximately $700 million. Most recently, we increased our regular quarterly dividend by about 10%.

And lastly, we committed to investing for growth. Earlier this year, we formed the S&P Dow Jones Indices joint venture. With some of the most widely followed and trusted brands in the index space, we believe this joint venture will prove to be of great value not only to our customers, but also to our shareholders.

In addition, during 2012, the company acquired QuantHouse, R2 Financial Technologies and Credit Market Analysis Limited to bolster our capabilities within S&P Capital IQ. We acquired Coalition Development Ltd. to add high-end analytics to CRISIL, that's our credit rating agency in India; and Kingsman SA, providing Platts with a springboard for growth into global agricultural commodity markets.

Okay. Now turning to the business results. McGraw-Hill Financial delivered for the full year in 2012 13% revenue growth, 24% adjusted operating profit and 32% adjusted earnings per share growth. Our operating leverage and share repurchases amplified the EPS.

Standard & Poor's Ratings Services ended an already solid year with a strong fourth quarter. Revenue for this segment grew 34% with a 46% increase in domestic revenue and a 23% increase in international revenue. Adjusted segment operating profit increased 63% and corresponding operating margin increased 750 basis points to more than 43%. Continued low interest rates, the tightest spreads of the year, concerns about the fiscal cliff and a surge in special dividends all contributed to a very strong quarter of debt issuance.

For the full year 2012, Standard & Poor's Ratings Services delivered double-digit growth for both revenue and adjusted operating profit. This was the second best worldwide corporate and government issuance year on record at $4.5 trillion and U.S. structured issuance increased more than 50%.

This chart shows a steady progression of increased issuance in the United States and, while a bit more erratic, a similar trend in Europe. The sequential fourth quarter increase in U.S. issuance was predominantly due to low treasury yields, low spreads, ample liquidity and an abundance of dividend recapitalization deals.

Let me turn over to S&P Capital IQ. Beginning this quarter, S&P Capital IQ -- and beginning this quarter, S&P Capital IQ and S&P Dow Jones Indices will reported -- be reported as separate lines of businesses and we're going to do this to give investors added transparency into the growth and value creation for both businesses.

So let me start with the S&P Dow Jones Indices. In the fourth quarter, organic revenue increased 5% and the addition of Dow Jones Index revenue brought total revenue to $110 million. The principal driver of the organic revenue growth was a 28% increase in assets under management and exchange-traded funds linked to S&P Indices to $402 billion. Including the assets under management linked to Dow Jones Indices, assets under management increased 27% to $466 billion. Partly offsetting this growth was a decline in average daily volumes from major exchange-traded derivatives and over-the-counter derivative activity of almost 20%. While the joint venture realized $67 million of adjusted operating profit, $50 million is retained by the company as 25 -- 27% of the profits are forwarded to our partners.

You can see the full year figures on this slide as well. We are encouraged by the prospects for 2013. Through November, investors pulled $119 billion from actively managed U.S. stock funds in 2012, the biggest yearly outflow since 2008, and that's according to the latest data from Morningstar. Industry exchange-traded fund inflows reached a record $191 billion in 2012, and of course that's surpassing $169 billion flow in 2008. We believe this strong trend of increased index investing will continue.

For Capital IQ, in the fourth quarter, S&P Capital IQ delivered top line growth of 8%, of which 5% was organic.

Two key offerings, S&P Capital IQ within Desktop Solutions and Global Data Solutions within Enterprise Solutions, delivered double-digit revenue growth. These results were offset somewhat by declines in revenue from equity research and the continued planned migration away from the TheMarkets.com. Both S&P Capital IQ and RatingsXpress delivered mid- to high-single digit subscriber growth. RatingsXpress is now available on express feed. This will enable customers to receive updates every 15 minutes instead of only once or twice during the day.

Adjusted operating profit decreased 1% and there was a modest decline in the adjusted operating margins as the segment integrates and develops newly acquired technology and products from R2, QuantHouse and CMA into new S&P Capital IQ offerings.

For the full year, S&P Capital IQ revenue increased 9%, of which 7% was organic, and adjusted operating profit increased 6%. Through the first 6 months of the year, adjusted operating profit increased 19%. But due to the acquisitions and the associated investment, profitability declined in the second half.

We have made great progress developing these new technologies. By the end of the first quarter, we expect QuantLINK to be able to deliver low latency data from every major exchange in North America, Europe and Asia. In addition, we anticipate rolling out our new portfolio of risk analytics product and that would be in the second quarter.

Let me shift now to the Commodities & Commercial market segment. Revenue growth in the fourth quarter was 9% with international revenue up 21%. The leverage of this business is very evident as adjusted operating profits increased 27% and the margin increased 300 basis points to 22.7%. Platts, J.D. Power and Aviation Week drove fourth quarter revenue growth and offset declines in McGraw-Hill Construction. Margins, while up year-over-year, were down sequentially due to the Kingsman acquisition and technology investments in new products and capabilities.

For the full year, Commodities & Commercial grew 9% and adjusted operating profit grew 40%. Both Platts and J.D. Power delivered record revenue. And with the explosive growth that Platts has provided and the investor attention that it's received this year, I don't think I can continue to call it our hidden gem.

Okay, let's hold it there, and now I'd like to turn the call over to Jack Callahan, our Chief Financial Officer, for additional detail on the financials, and he will also be going into the outlook for 2013. Jack?

John F. Callahan

Thank you, Terry. This morning, I want to discuss 3 topics. First, now that Education has moved to discontinued operations, I want to baseline our McGraw-Hill Financial results, including cash flow and our strong balance sheet position, which now form the starting point for future performance. Second, I will detail the onetime charges that were essential to separate and stand up the 2 companies. This will help investors better evaluate the underlying performance of McGraw-Hill Financial. And lastly, I will provide our guidance and outlook for 2013 across our 4 lines of business and for other selected financial items that are foundational to the future performance of McGraw-Hill Financial.

Let me begin by comparing our previously consolidated McGraw-Hill Companies results, which includes McGraw-Hill Education, to our new continuing business, McGraw-Hill Financial. As you can see from the slide, McGraw-Hill Financial has achieved a 2010 to 2012 revenue CAGR of 11%, almost 3x higher growth compared to The McGraw-Hill Companies. This growth is based largely on capital and commodity market participants who value the benchmarks, analytics and independent insights that McGraw-Hill Financial provides. Reflecting the stronger revenue growth, McGraw-Hill Financial has delivered 2010-2012 adjusted earnings per share CAGR of 20%, a growth rate over 50% higher when compared to our historical performance pre-separation.

It has taken a tremendous effort across the organization to establish 2 separate industry-leading companies.

Now we turn our focus across McGraw-Hill Financial to provide market participants with valuable and essential services and to target more pronounced growth for both our shareholders and employees.

Let me review full year results. McGraw-Hill Financial revenue grew 13% to $4.45 billion and adjusted segment operating profit growth grew 21%, with margins increasing 230 basis points to 35.7%. The margin expansion was driven by the benefits realized from our cost reduction initiatives and positive sales mix. Adjusted unallocated expense grew 2% as an increase in incentives offset tight cost management. These unallocated expenses include approximately $20 million to $25 million of stranded costs due to the divestiture of McGraw-Hill Education.

The tax rate declined 130 basis points while noncontrolling interests grew $33 million, both primarily due to the impact of the S&P Dow Jones joint venture.

For the year, adjusted net income from continuing operations grew 24%, while adjusted earnings per share from continuing operations grew even faster with 32% growth to $2.75.

Share count dropped from 304 million shares to 285 million shares due to our share repurchase program.

Overall, 2012 was a strong base year for McGraw-Hill Financial and one on which we plan to build for 2013.

Now I will discuss the more recent fourth quarter results. McGraw-Hill Financial delivered excellent growth, well ahead of full year results with a 22% increase in revenue and a 45% increase in adjusted segment operating profit. As Terry mentioned, Standard & Poor's Ratings led the growth, benefiting from the strong debt issuance trends, especially when compared to the modest market activity of a year ago.

Adjusted unallocated expense grew 7%, primarily due to increased incentive compensation due to the strong overall operating results.

Our tax rate declined 150 basis points versus prior year primarily due to the impact of the S&P Dow Jones Indices joint venture. Offsetting this decline was a $17 million increase in noncontrolling interests, again largely representing CME's share of the joint venture profits.

Adjusted net income grew 52% while adjusted earnings per share grew 56% to $0.72. Overall, a solid finish to a strong year.

Now let me just take a moment to run through the onetime charges, which we have excluded from adjusted earnings. McGraw-Hill Financial incurred a net $25 million in onetime charges in the fourth quarter and $174 million for the full year. Excluding the $52 million noncash benefit from a change in vacation policy, the onetime costs were $77 million in the fourth quarter and $226 million for the full year. Going forward, Growth and Value Plan costs and related restructuring actions are anticipated to ramp down over the first half of 2013.

With regard to discontinued operations, McGraw-Hill Education incurred onetime cash charges of $61 million and a $497 million intangible impairment at School Education, which we indicated we would incur in November of 2012 when we announced we had signed an agreement to sell McGraw-Hill Education to Apollo. There was also a benefit from the company-wide change in vacation policy in the discontinued operations.

Now let me turn to cash flow and the balance sheet. Free cash flow, before the payment of the regular dividend, was $626 million in 2012. The decline of $183 million versus last year was entirely driven by the Growth and Value Plan expenses and a $150 million pension contribution made in the fourth quarter of 2012. We finished the year with $761 million in cash and short-term investments and over $1.2 billion in debt, $800 million long term and $457 million short term. The short-term debt consists of commercial paper, which will be paid down with the proceeds from McGraw-Hill Education.

Overall, we have an exceptionally strong balance sheet, and we intend to maintain it going forward to both build the business, and as appropriate, return cash to shareholders.

Now let me turn to 2013 guidance. As a reminder, our guidance is based on 2012 adjusted results from continuing operations. First, the lines of business. We expect S&P Ratings to grow high single digits, both top and bottom line, reflecting the continued favorable issuance environment. Given the strong finish this year, we obviously expect the comparisons to 2012 will become more challenging in the second half of 2013.

For S&P Capital IQ, we expect mid-single-digit revenue growth, but relatively flat profits given continued investments. We do anticipate profit growth in the back half of the year as the first half of the year is likely to be below year ago as we cycle through acquisitions, particularly QuantHouse, and targeted technology investments.

For S&P Dow Jones Indices, we expect approximately 20% top and bottom line growth, benefiting from the full-year benefit of the joint venture. We expect organic growth to be in the mid-single digits, although results are always a bit of a challenge to predict given the ongoing volatility in the market.

For Commodities & Commercial, we expect high-single-digit revenue growth with continued margin expansion targeting low-double-digit profit growth.

Taken in total, we expect high-single-digit revenue and segment operating profit growth for McGraw-Hill Financial.

Let me provide additional detail on selected financial items. Unallocated expense, which was $202 million in 2012, should decline by $10 million to $15 million in 2013 although this line can be impacted by swings in incentive compensation. We expect net interest expense to be approximately $35 million to $40 million versus $81 million in 2012. This decline reflects the paydown of $400 million and 5 3/8% senior notes in November of 2012 and the anticipated paydown of our existing short-term debt once the funds from the sale of McGraw-Hill Education are received. We will also earn interest on the $250 million of the 8.5% senior unsecured notes, which will be received as part of the sale of McGraw-Hill Education to Apollo.

We expect our adjusted tax rate to be approximately 35% in 2013, 100 basis points decline from 2012, reflecting a full year's benefit of the S&P Dow Jones Indices joint venture and other ongoing tax planning initiatives. We expect noncontrolling interests to be $90 million to $100 million versus $52 million in 2012, largely due to the full-year impact of the joint venture. Capital expenditures are anticipated to be approximately $125 million, and free cash flow should continue to be strong and is expected to be in the range of $650 million to $700 million before the payment of the basic dividend.

Summing up. We expect another strong year in 2013 with revenue growth in the high-single digits and earnings per share of $3.10 to $3.20, approximately 15% growth. Please note, our guidance does include the impact of continued share repurchase. Once we receive the proceeds from the sale of Education, we anticipate resuming our share repurchase program subject to market conditions. As a reminder, 16.9 million shares remain in our current share repurchase authorization.

Now let me turn the call back over to Terry.

Harold Whittlesey McGraw

Okay. Thanks, Jack. And as you heard from Jack's review, 2012 was just a terrific year for McGraw-Hill Financial. We continue to generate substantial amounts of cash, and our 2013 guidance paints a picture of continued growth.

Okay, with that, let me now ask Ken Vittor, he's McGraw-Hill's General Counsel, to address the recent legal developments and how we plan to defend our company against the civil complaint that we just received last week from the Department of Justice. Ken?

Kenneth M. Vittor

Thank you, Terry. I want to describe the legal actions that were brought last week by the Civil Division of the United States Department of Justice, as well as the number of cases filed just after the DOJ announcement by State Attorneys General. As Terry said at the beginning of the call, the company does not believe the cases have legal or factual merit, and we intend to defend the company vigorously as we have successfully defended against more than 40 other financial crisis-related cases.

Last Monday, February 4, the Civil Division of the United States Department of Justice filed a civil lawsuit against The McGraw-Hill Companies and Standard & Poor's Financial Services LLC in federal court in California. No other companies are named as defendants in the case nor are there any individuals who have been named as defendants. The case was brought under the Financial Institutions Reform Recovery and Enforcement Act of 1989, known as the FIRREA statute. This is a federal statute that permits the Department of Justice to seek civil penalties if it can establish that violations occurred of a number of other statutes and that the violations affected a federally insured financial institution.

In this case, the government is alleging that violations of the mail fraud, wire fraud and bank fraud statutes occurred and that they affected financial institutions, including Western Corporate Federal Credit Union, known as WesCorp; Citibank; and Bank of America. The government alleges that the company violated these statutes when it issued its forward-looking rating opinions concerning creditworthiness or confirmed those opinions of 33 collateralized debt obligations, known as CDOs, in 2007. The government claims that in preparing its ratings, S&P knowingly failed fully to take into account risks associated with residential mortgage-backed securities, known as RMBS, that were being used as collateral for the CDOs.

The government also claims in its lawsuit that S&P statements about its independence and objectivity were false because during the years 2004 to 2007, S&P allegedly made adjustments or delayed adjustments to the models it used to rate RMBS and CDOs in order to preserve market share at the expense of analytical accuracy. The government says that it is seeking more than $5 billion in penalties. This figure is based on losses that were allegedly suffered by federally insured financial institutions that purchased CDOs rated by S&P in 2007. The complaint includes specifics regarding only about $500 million of the $5 billion the government is seeking. The government has not explained where the other $4.5 billion in alleged losses come from.

The revenues S&P earned in connection with the CDOs identified in the complaint were less than $15 million. About half of the par value of the CDOs identified in the complaint relates to losses that allegedly affected Citibank and Bank of America after purchasing CDOs that they, or their affiliates, had underwritten or arranged. The penalties that the government is seeking in this case are based on its position that they are not required to show that the losses were proximately caused by S&P's rating opinions.

The government cannot recover any penalty, of course, unless it first proves that a violation of one of the statutes occurred. S&P believes that to do this, the government is required to prove that S&P rating committee did not believe the ratings that S&P gave to the CDOs at the time these rating opinions were issued; that S&P assigned those ratings with the intent to defraud the investors, which purchased those CDOs; and that S&P's rating opinions affected a federally insured financial institution.

As I said at the beginning of my remarks, the company intends to defend this lawsuit vigorously. We believe that the complete record does not support the government's theory. S&P did not make changes to its model that it believed were not analytically justified nor could S&P refuse to make changes that had been determined to be analytically justified by a committee. The culture at S&P has always been characterized by vigorous debate and robust analysis. Although there may have been opinions within the company, even very strongly held opinions, that did not carry the day, this is not evidence of fraud.

The government's claim that S&P did not fully take into account the risk of RMBS that were going into CDOs in 2007 is also, we believe, a hindsight criticism of S&P's rating opinions during this turbulent time, which we don't think can support a fraud claim. The complaint details information about deteriorating residential mortgages that S&P had available to it in February, March, April, May, June and July of 2007. This data, by the way, about the rate at which residential mortgages were becoming delinquent, is the same data that was available to the rest of the market and to the government. It is the same data that the Federal Open Market Committee was reviewing during 2007 in the transcripts that were made public a few weeks ago.

What the complaint leaves out is all of the work being done by S&P in each of those months to understand that data and to make good-faith judgments about what it might mean for the security that S&P rated. In fact, S&P reviewed this data every month and developed more stressful tests to help it update its opinion of any RMBS that was exposed to these delinquent mortgages. As a result, S&P took an increasing number of negative rating actions, CreditWatch actions and downgrades in February, March, April, May, June and July 2007, even before its large-scale rating actions in mid-July. These negative rating actions had a direct and automatic impact on S&P's CDO ratings. If the RMBS that was put on CreditWatch were downgraded within a CDO or was being considered for a new CDO, S&P's CDO rating took that negative status into account and required additional protection for the CDO.

Unfortunately, these actions turned out to be insufficient in anticipating the great speed, depth and duration of the housing crisis that ultimately came to pass. But the company does not believe the government can prove that this failure, common to nearly everyone at the time, was the product of intentional misconduct by anyone at S&P.

Significantly, the government's complaint also ignores the fact that all of the CDOs that it identifies received a virtually identical rating from at least one other rating agency.

The company has publicly responded to the government complaint in 2 press releases last week. These press releases and additional information about the government's case is also available on S&P's website.

Following the announcement of the DOJ lawsuit, 13 additional states and the District of Columbia filed lawsuits against McGraw-Hill and S&P. These losses generally follow the pattern of the lawsuits that were already pending in Connecticut, Illinois and Mississippi, although there are some differences among them. One state, California, is suing for losses incurred by 2 state pension funds under a statute, the California False Claims Act, that potentially allows for treble damages. The lawsuits in Connecticut and Mississippi were brought against both S&P and Moody's. It is possible that additional states will file similar lawsuits.

Generally speaking, these cases are being brought under each state's consumer protection law and focus on S&P's statements regarding the independence and objectivity of its ratings practices.

The company has been vigorously defending these lawsuits. It is the company's position that its statements about objectivity and independence cannot be the basis for a claim of deception.

The company has recently received a very favorable ruling on this issue from the United States Court of Appeals for the Second Circuit. In addition, the United States Court of Appeals for the Sixth Circuit recently dismissed a civil lawsuit brought by the Ohio Attorney General against S&P, Moody's and Fitch arising from its pension fund's purchase of RMBS rated by the 3 rating agencies. In short, we believe that we have strong defenses in the DOJ and the state lawsuits and expect to prevail.

Now let me turn the call back to Terry.

Harold Whittlesey McGraw

Okay, thanks, Ken, and we can follow up on that. At this point, though, I'm going to turn it over to Doug Peterson. Doug is the President of Standard & Poor's Ratings Services, and Doug is going to provide a review of the action S&P has taken to strengthen the ratings process since the financial crisis began in 2007, which is an ongoing and continuous process as markets change. So, Doug?

Douglas L. Peterson

Thank you, Terry. I appreciate the opportunity to be here this morning. It's been nearly 18 months since I joined Standard & Poor's as President. This follows a 25-year career with Citibank where I most recently served as Chief Operating Officer of Citibank N.A. Over my career at Citi, I worked with S&P in various ways and was impressed by the rigor, knowledge and professionalism of S&P analysts. Since joining S&P, I have developed an even greater appreciation of the tremendous talent we have in our organization. Obviously, we are facing a significant legal challenge, but I'm confident that this team of professionals will not let it distract them from the task at hand. They are an extremely committed group who care about the quality of the ratings they provide and are continually focused on how they can do their jobs even better.

Today, I'd like to talk with you about both the past and the future. It's important for you to know the many changes that have taken place at S&P and what's in store going forward. To begin, let me say that we have taken to heart the lessons learned from the financial crisis and made extensive changes that reinforce the integrity, independence and performance of our ratings. We brought in new leadership, instituted new governance and enhanced our risk management.

Long before the financial crisis, we had in place policies and procedures to manage potential conflicts of interest, including a separation of analytical and commercial activities and a ban on analysts from participating in fee negotiations. An analyst's compensation has never been based on the volume of securities they rate or the type of ratings they give out.

Since 2008, we have taken many steps to enhance our ability to provide independent, high-quality ratings. They can be summarized under 4 headings. First, we reinforced our analytical independence by rotating analysts assigned to a particular issuer and by enhancing analyst training on issuer interactions.

Second, we updated our methodologies and models. We reassessed the principles underlying the way we rate debt. Based on what we learned, we changed the way we rate almost every type of security that was affected by the financial crisis. For all mortgage-related securities, we significantly increased the credit enhancement required to achieve a AAA rating and, in general, have made it more difficult for securities to achieve high ratings. We also strengthened our risk management by instituting a model validation process independent of any commercial considerations, and we brought in a new Chief Risk Officer.

Third, we enhanced our global connectivity on interpreting and responding to credit conditions. Specifically, we established what we call Credit Conditions Committees around the world to identify and monitor risks to the interconnected global credit systems across all asset classes.

Lastly, we bolstered our governance, compliance and risk functions. We strengthened our governance structure to meet the requirements of the newly instituted regulatory regimes in the U.S., Europe and the rest of the world. In doing so, we increased staffing across all independent control functions. All told, S&P invested approximately $400 million in the systems, governance, analytics and the methodologies we used to rate securities.

One topic that we have given a great deal of thought to is our business model, in which the issuer pays for the rating. Along with many others, we have studied the different model options. We believe the issuer pay model is not just best for our business, but also best for the market. It is the only business model that provides a level playing field in terms of disclosure, and transparency is critical to well-functioning markets. Anyone can go to our website and see how we rate a company, country or security free of charge. That's not the case with the subscriber model, which allows only those who pay to see a rating and promote selective disclosure.

We have learned many valuable lessons from the regrettable fact that we did not anticipate the 34% collapse in U.S. housing prices, and we continue to find ways to improve our ratings and our business. Toward that end, 3 months after I joined S&P, we created a new organizational structure to enable us to better focus on 3 priorities to drive growth and consistency around the globe.

The first is ratings excellence. We strive to differentiate S&P by being the premier source of global benchmarks and research that help our customers identify, measure and manage credit risk. The second is service excellence. We're sharpening our focus on investors and other market participants by enhancing the way we serve and respond to them. And lastly, we're delivering with discipline. We're executing with operational excellence through the efficient use of our resources and an even stronger commitment to quality, control and compliance.

To support these 3 priorities, we realigned several areas and brought in a new leadership to strengthen the management team. These include Don Howard, who joined us last June as S&P's Chief Risk Officer, a newly created role. Don brings years of experience of management in a variety of financial institutions around the globe.

To improve our thought leadership in macroeconomic forecasting, we welcomed Paul Sheard as S&P's Chief Global Economist. Paul is an internationally known economist, thinker and author.

To strengthen the management oversight of our analytical units, we appointed Paul Coughlin as Head of Global Analytics to ensure that we have common policies, processes and platforms around the world. In addition, Paul assumed worldwide responsibility for our structured finance business.

As we look forward, we see an even greater role for independent rating agencies to sustain global economic growth. Banks are deleveraging and rebuilding their balance sheets while also complying with new regulatory requirements. That means the debt capital markets are going to have to provide more of the funding for public and private sector growth. Emerging market countries are developing credit cultures in order to finance schools, roads, energy and hospitals where our ratings facilitate access to more investors, and the outlook for both new issuance and refinancing is positive. Overall, these are favorable trends for the global economy and for our business.

Standard & Poor's has a long history of serving markets and investors. We trace our origins back to 1860 when Henry Varnum Poor published a book called The History of Railroads and Canals in the United States. His goal was to help investors better understand the securities they were buying. While we always have to work through challenges, we see excellent opportunities in our business by continuing to serve markets and investors. We look forward to discussing these opportunities with you in the days ahead.

And with that, I will pass it back to Terry.

Harold Whittlesey McGraw

Yes. Thanks, Doug. And, Doug, in your last point, in talking about some of the infrastructure, between now and 2030, we're going to have to raise, worldwide, some-$70 trillion in infrastructure financing, which is largely going to be coming from the capital markets and bringing a lot of enhancements. So it's very exciting on that part.

Okay. Before we go to questions, let me just make a few summary remarks. First, McGraw-Hill Financial had a very strong year: 13% revenue growth, 32% growth in adjusted diluted earnings per share. Second, our new guidance demonstrates our expectation for continued growth in 2013. And third, we delivered tremendous value through the execution of the Growth and Value Plan, which included the sale of McGraw-Hill Education, which, again, closed in the first quarter; the achievement of $175 million of cost reductions; the distribution of $3.1 billion through share repurchases and dividends; and the investment in numerous acquisitions to add to the future growth of the company. Simply put, 2012 was an outstanding year, and we look forward to continuing that progress in 2013.

As we also -- as we head into 2013, we have heard that we're confronted with new litigation. We have put the best people on the case to defend the interests of our customers and our shareholders. And rest assured, we will vigorously defend against these erroneous claims.

And with that, we will now take your questions. So let me turn back over to Chip, and, Chip, will you provide everyone with dial-in instructions?

Robert S. Merritt

Sure, Terry. Just a couple of instructions. [Operator Instructions] And now, we'll take your first question. Operator?

Question-and-Answer Session

Operator

This question comes from William Bird with Lazard.

William G. Bird - Lazard Capital Markets LLC, Research Division

I was wondering if you could talk about the amount of buybacks assumed in the outlook and also whether a component of it is accelerated.

Harold Whittlesey McGraw

Go ahead, Jack.

John F. Callahan

Bill, right now, we're just affirming that, today, share repurchase is part of the 2013 program. In terms of the specific amounts, we want to retain some flexibility as the year transpires. Your question about will we consider it an accelerated action, that's a possibility, but we haven't made any definitive conclusion on that. But again, we're not -- we don't intend to be back into the market until we actually receive the proceeds from Education, which will be towards the end of the first quarter. But we'll give you more of a complete update as we get through the year.

William G. Bird - Lazard Capital Markets LLC, Research Division

And as a follow-on, would you be willing to add leverage to buy back more stock?

John F. Callahan

I don't really feel a need to do that over the near term, Bill, right now, but I certainly understand the opportunity from a longer-term point of view.

Harold Whittlesey McGraw

Yes. And, Bill, the cash generation capability is so strong that we think that even in -- if we go to an accelerated position, that we'd be in pretty good shape for that. But again, we'll wait for the proceeds in March, and we'll go from there. But share repurchase is going to be a very important activity for us in 2013.

William G. Bird - Lazard Capital Markets LLC, Research Division

And could you share what the next steps are in the DOJ process?

Harold Whittlesey McGraw

Let me ask Ken to do that. Ken?

Kenneth M. Vittor

Yes. There will be a schedule established by which we will be required to respond to the complaint, and that will be probably in the next 60 to 90 days.

Operator

Our next question comes from Manav Patnaik with Barclays.

Manav Patnaik - Barclays Capital, Research Division

First, just a question on the legal side. In terms of all the states that are teaming up together in many ways to -- for the lawsuit, can you maybe help us understand what the difference is between what happened in Ohio, which you noted obviously went in favor of all the rating agencies, and Connecticut, which is leading, I guess, the coalition here and their specific case, I guess, is heading to trial next year. So I just wanted to understand what the difference there between Ohio and the rest of these guys are now.

Kenneth M. Vittor

Yes. I'd be happy to do that. The Ohio case related to investments made by pension funds, and they were suing for their alleged losses, hundreds of millions of dollars of alleged losses. And both the District Court and the Court of Appeals in the Sixth Circuit dismissed those cases for a variety of legal reasons. The state Attorney General cases that we are now addressing and that some that have already been brought by Connecticut and other states are not brought on behalf of investors, except in one case, which we can talk about, the California case. Generally, these deal with consumer deception claims, that consumers in each of these states were allegedly deceived by representations made by S&P, and in some case, other rating agencies, that they were independent, that they were objective in arriving at their rating. So these are different cases. These are deception cases brought, based on statements about independence and objectivity. The Ohio case you referred to was relating to investment losses brought by various pension investors.

Manav Patnaik - Barclays Capital, Research Division

Then -- I guess then related to Connecticut, can you just explain I guess -- I guess it's been 2 years or so since the case has been ongoing, and now they've been sent to trial. Can you help us understand what the decision was to send it to trial? Like it seems like you guys disagree clearly.

Kenneth M. Vittor

Yes. There was a threshold ruling or rulings on motions to dismiss, and so the case is now in the next phase. There's no decision on the merits in that case. We're just in the next phase, which involves discovery and elements leading up to whether there will be another motion to try to dismiss the case. So there's no decision on the merits in that case. There were preliminary decisions on dismissal motions.

Manav Patnaik - Barclays Capital, Research Division

Okay. And just one question on the guidance. In the Indices section, the plus 20%, I guess, revenue growth you guys guided to, seems like it's a little light than the $500 million you had noted when you first made the acquisition. Am I reading that right, and maybe why so?

John F. Callahan

Yes, Manav. It's probably a little bit lighter relative to the initial story. I just think some of the market activity that we've seen, particularly relative to volatility in the third or fourth quarter has -- is not quite as robust as we had seen in the back half of '11 into '12. So it's probably a bit, but again, we're being conservative about our outlook there again, because this is so hard to predict, the volatility in the marketplace there. But we still -- we're still very, very excited about how those 2 businesses have come together, and we're really looking forward to accelerated growth over the long term.

Harold Whittlesey McGraw

Yes. And, Manav, it's a little early on, but one of the things I was talking about is the switch from outflows to inflows from actively managed equity funds into index fund. It's a trend that's not only taking place here domestically but worldwide, and we see tremendous uplift in terms of volumes on this one. One of the reasons that we wanted to break out S&P Dow Jones Indices so that you could see those numbers, and we'll keep those in front of us as we go forward, is so that you can see not only the growth, but the value creation in those. And we're very, very excited about this business.

Manav Patnaik - Barclays Capital, Research Division

Got it. And then last question, just to understand, obviously, in terms of use of cash going forward. Just on your M&A strategy, should we be expecting more sort of tuck-ins like we've seen at Cap IQ and then, I guess, Kingsman at C&C? Or I guess can you maybe just help us understand your pipeline and maybe appetite for larger deals?

Harold Whittlesey McGraw

Well, again, the 4 uses of cash, we are focused on dividend and share repurchases. Both of those, they're no change, and we're going to be very active in both. In terms of transactions and organic growth, we like to focus more on the organic growth, and that's why we break it out. And so what we are looking for is more specific capabilities in terms of transactions that can help some of our platforms in -- and some of our data and analytic platforms in our businesses. So to that extent, tuck-ins is probably a good word. But what we're looking for is added skills and capabilities to enhance the platforms that we have.

Operator

Our next question comes from Peter Appert with Piper Jaffray.

Peter P. Appert - Piper Jaffray Companies, Research Division

So 2 questions for Ken. Ken, I was hoping you might give us a little more color in terms of the process and time line on the DOJ case, beyond the response to the complaint in the next 60 days. And then secondly, on the state cases, can they be addressed on a global basis, or do you have to address them one at a time?

Kenneth M. Vittor

Well, on the DOJ, as I said, we will be required to respond to the complaint sometime within the next 90 days. And depending on what happens at that stage, then there will either be motion practice or discovery. And we intend to defend this case vigorously, so we will be pursuing all relevant discovery to defend against these claims of fraud against the company. As to the states, it's still early days. We will be exploring whether there's a possibility of coordinating with respect to some discovery activity, so that witnesses can testify once for several state proceedings, but it's early days so that has not yet been resolved.

Peter P. Appert - Piper Jaffray Companies, Research Division

Okay. And what -- how about just in terms of -- as we think about the time line around DOJ, would this be potentially going to trial in 2014?

Kenneth M. Vittor

It's hard to predict because we're still at the outset of scheduling and determining how much discovery will be necessary and what motion practice will be necessary. But I think 2 to 3 years would be a reasonable estimate, if not more, depending on how those various stages of litigation go and the calendar of the court.

Peter P. Appert - Piper Jaffray Companies, Research Division

Okay. And on the fundamental front, Terry, the company has posted very impressive margin improvement in the Commodity & Commercial in the Cap IQ index business in the last couple of years, and the guidance implies some further upside. How do we think about the next couple of years? Are we approaching target levels in terms of margin? How meaningful is there room for further upside?

Harold Whittlesey McGraw

Well, again, I think that for McGraw-Hill Financial, there's a couple of things. The first one is revenue growth. We see very, very strong revenue growth here. And with that kind of capability, we think that from an expense standpoint, that if we can manage that very efficiently, that we could get higher operating profits and, therefore, margin expansion. So I wouldn't put targets at this point. I am more focused on the revenue growth generation. And again, I think that one of the things that we've been breaking out and we've been very successful at is the organic part. And so our own creativity and ingenuity is at the forefront, and so we're pushing aggressively on that. But I see margin expansion.

Peter P. Appert - Piper Jaffray Companies, Research Division

Okay, great. And one thing I forgot to ask, Ken, the -- on the California case, to the extent that, that -- superficially, looks like the Ohio case, what's distinct about it?

Kenneth M. Vittor

Well, it'll be governed by California law. It does raise an interesting question, though, because it does allege losses for CalPERS, which are the same losses that we are defending a lawsuit against but brought by CalPERS. So an initial procedural question will be we're in 2 courts with respect to the same claimed losses, one brought by the California Attorney General and the other brought by CalPERS. So that will need to be addressed as we defend the case. But the short answer to your question is it's different law. State law governs each state action. And the Ohio case was in a federal court as well, so we're dealing with California state law and that will be what law is applied to the claims in that case.

Peter P. Appert - Piper Jaffray Companies, Research Division

And the state Attorney General cases are all under state law?

Kenneth M. Vittor

That's correct.

Operator

Our next question comes from Craig Huber with Huber Research Partners.

Craig Huber

A couple of legal questions, please. Can you update us on the New York Attorney General? What's going on there, potentially, and update us on the Martin Act part of it as well, please?

Kenneth M. Vittor

Well, as you may know, we entered into an agreement with the New York Attorney General back in 2008, and we are in full compliance with that agreement. And that is the current status. We are in frequent dialogue with all of law enforcement agencies across the country and respond to requests for information. But with respect to that agreement, which is a confidential agreement, we are in full compliance with that agreement.

Craig Huber

So does that mean then with the New York Attorney General that they cannot file a case against S&P McGraw-Hill?

Kenneth M. Vittor

I really can't speak to the agreement, because it's a confidential agreement.

Craig Huber

Okay. And then on the Department of Justice lawsuit against you guys, why do you think that they're singling out S&P here and not Fitch and Moody's?

Kenneth M. Vittor

We can't speculate on the Department of Justice's motivations in deciding to sue Standard & Poor's and no other entity in connection with this lawsuit. The facts are that, as I indicated in my remarks, our ratings, the S&P Ratings for the CDOs that issue in this lawsuit, are identical to the ratings issued by other rating agencies. So we don't have an explanation, and you'll have to ask the Department of Justice as to the motivation. For us, the question is less the why as in the how. How will the Department of Justice prove a fraud claim against S&P's analyst for arriving at ratings through a committee process that are identical to the ratings issued independently by other rating agencies? So that, to us, is the burden that we don't believe the Department of Justice can sustain. So as to the why, that's for the Department of Justice to answer. The how is the question we are addressing, how will they prove the case of fraud against S&P Ratings when the ratings that were arrived at through a committee process were identical to ratings issued by other rating agencies who are not parties to this lawsuit.

Craig Huber

Then on the fundamentals, please, Terry, the $60 million or so cost savings you took out your Financial services operation last year gets to about 1/3 of the $175 million. I mean, that's roughly about 2% of your cost base excluding Education for 2012. Do you think you have more to go of ripping out costs over the next couple of years here?

Harold Whittlesey McGraw

Definitely, definitely. I mean, again, we're in the early stages -- maybe for Jack, not such early stages. But we're in the early stages of standing up McGraw-Hill Financial. And again, as I was saying to Peter, again, we're focused now with McGraw-Hill Financial on the top line. We believe that we have terrific upside in terms of revenue growth. And if that's right and we manage those expense bases very, very carefully, I think that we can get the margin improvement. So yes, I think that we were conservative when we said that we thought we could get $100 million of cost savings, and we had to get into it. And as we did get into it, we found more opportunities and we were able to get up to $175 million. So yes, I think that there is more to come.

Craig Huber

So can you put us a number around that, I mean, sort of looking for maybe another $50 million annualized to rip out of the business?

John F. Callahan

No. It's just -- Craig, it's a little premature right now to do that. Look, we're going to let the dust settle and get separation behind the standup McGraw-Hill Financial, but we completely recognize -- well, the first priority is going to be driving top line growth that we now have sort of our productivity phase to more focus on McGraw-Hill Financial. And we'll be back to update you more on the specific initiatives and the benefits of that program as we go through the year.

Craig Huber

And then one last minor housekeeping question. What is your plans for pricing for S&P Ratings for this new year and Capital IQ?

John F. Callahan

For Cap IQ?

Craig Huber

And for S&P Ratings as well?

John F. Callahan

Well, in this -- I don't think there's anything unusual about the pricing...

Craig Huber

Are you expecting to bring it up -- take it up by roughly, say, 4 to 5 percentage points this year, like you've done in the past?

John F. Callahan

I think we're probably in the range of 3% to 4%, which is generally in line with a lot of the -- but let's face it, the biggest part of the cost structure is people. You're looking at sort of -- between merit and health care benefits, you probably have an inherent inflation of around that -- inflation around that same level. So right now, we're sort of in that 3% to 4%.

Operator

Our next question comes from Bill Warmington with Raymond James.

William A. Warmington - Raymond James & Associates, Inc., Research Division

A question for you on Capital IQ. I just wanted to comment that the mid- to high-single-digit sub growth, I think, is pretty impressive in this environment, and I wanted to ask what's driving that growth. Share gains, new firm formation? If you could talk little bit about that.

Harold Whittlesey McGraw

Well, there's a couple of things. One, with the acquisitions that we have gone after, R2, QuantHouse, CMA, what we're doing is expanding the customer base and expanding the skill set in terms of the platform. So you're getting growth in terms of customer retention, and you're getting some market share because of the new capabilities on that. Again, it's not just acquisition. It's also the organic component of being able to understand customer drives and needs and to be able to satisfy. If we can do that without transactions, so be it. If we can do it faster through a transaction, we will on that part. But the attention is on those skill sets.

William A. Warmington - Raymond James & Associates, Inc., Research Division

One other question I've been getting frequently is one about legal costs in terms of -- to try to get a sense for what were costs in 2012, what's being built into the budget in 2013 in terms of legal costs and are we seeing an uptick in 2013, because we're heading into what's typically more expensive in terms of discovery and trial phases. Your thoughts on that.

Harold Whittlesey McGraw

Well, first of all, let me ask Jack to handle that. But first of all, again, the suits that we have received from the 2007 period, as Ken was saying, 41 of these suits, representing hundreds of billions of alleged damages, have been dismissed or voluntarily withdrawn. The problem, Bill, is that we do everything at the federal level. And when there's so much litigation out there that it takes 2 years, 2.5 years, to get before a federal judge, in most of the cases with these suits, they were dealt with almost the same day that the judge seen them, in terms of being dismissed. So we feel very good about the 41 suits that have been dismissed on all that part. But in terms of legal expense, they just haven't gone forward. So they just sort of sit in waiting on this part. Now again, in terms of -- and again, these suits aren't going to trial on that part. So that's good and that's where the costs build up. But, Jack, do you want to...

John F. Callahan

Well, just -- well, it's not our practice to specifically disclose legal expense. However, I would say that it's not an insignificant line item in our income statement right now. We do recognize that perhaps there could be some pressure on that expense going forward into '13. But we consider that both in our overall guidance and our margin expectations for ratings next year. So I think we'd like to leave at this point in time that we can manage it, but we'll update you as appropriate, if necessary, as we go through the year

William A. Warmington - Raymond James & Associates, Inc., Research Division

Very helpful. And then one last question on the legal side. I know that the focus of the discussion so far really has been on defense of the case. And I wanted to just ask the question, a theoretical question, that's popped up from time to time about a potential settlement. And the question is, are there any restrictions, potentially, on structuring such a settlement? How would such a settlement theoretically be structured? If you could talk about some of the options there based on some of the previous precedents you've seen.

Kenneth M. Vittor

Well, we are always open to a reasonable settlement. And in fact, S&P, in the past, has reached reasonable settlements in cases such as the Orange County case and the case brought by Connecticut with respect to municipal finance ratings. So -- and other cases. So we are open to reasonable settlement and discussing reasonable settlements. That will vary from case to case. So the answer is if there's a reasonable settlement opportunity made available to us in any case, we are open to discuss it.

Operator

Our next question comes from David Reynolds with Jefferies.

David Reynolds - Jefferies & Company, Inc., Research Division

I wondered if I could ask a question on the Education business, please. I guess it would be fair to say the closure, the completion of the trade sale has -- have slipped somewhat. Could you just perhaps shed some light on why that has happened?

Harold Whittlesey McGraw

No, I think it's just the normal process. And in terms of Apollo, they first had to go out and get their credit ratings. They've been completing that process, and now they're securing the financing aspect of it. And there was some desire for some more audited results, and so it took a little bit of slippage. But as Jack was saying, we're looking for a first quarter event here and maybe a little sooner, who knows. But everything is on track. And so, again, it's maybe a little bit longer, a few weeks, but everything's on track.

John F. Callahan

Yes, Dave. Just technically, it was just a pragmatic determination to go off the fourth quarter numbers, not the third quarter numbers. So there's the audit. So once that's together, I suspect everything will move forward.

David Reynolds - Jefferies & Company, Inc., Research Division

And if I could just slip a follow-in -- on in there then. So I've obviously worked through as much of the press release today as I can. But in terms of any indication of how the Education business fared in the fourth quarter, how was business?

John F. Callahan

It was a challenging finish to the year. The top line was down. It was down around the 10%, 11%, in line with where our sort of full year results were. But -- and particularly, it was more challenged in the Higher Ed section.

David Reynolds - Jefferies & Company, Inc., Research Division

Great. And perhaps -- and just one final question. I had a question which has cropped up with a number of investors, I think. I guess we are clearly not as close to you are -- as close to the credit rating agency business model as you are. In terms of looking forward, do you believe or do you sense that the DOJ lawsuit has any impact whatsoever on your competitive position within the marketplace, or is it an irrelevance?

Harold Whittlesey McGraw

Well, actually, we had this discussion yesterday, and Doug is, as you know, he's very close to our clients. And the comment has been that there has been no impact. In fact, there's growing appreciation for S&P's positions on it. Given the capital flows that are going to be required, the capital demand on that part, there's a broadening need in all quadrants, whether it be structured, government, corporates. And Doug feels quite good. You want to add anything, Doug?

Douglas L. Peterson

Let me just add that, as you know, last year, the global markets, especially in the fixed income area for governments, for financial institutions and both investment grade and non-investment grade was up over 18%, 29% in the U.S. Terry mentioned earlier that there's a very big backlog globally of financial needs as banks deleverage, as countries develop their infrastructure in the emerging markets. We showed a slide earlier that the European markets are still heavily bank-funded. So we see that the demand and the relevance of ratings and research continues to be very high. We have built excellent controls, governance and ways to ensure that our global insights are shared across all of our teams. And in the last week, we have received very supportive comments from our issuers and from investors about the type of quality of research we produce. So we're still moving forward. Our team is dedicated. They're committed, and we're continuing to support the market.

Harold Whittlesey McGraw

Yes. Thanks, Doug. The capital demand side of all of this, David, is stunning. The nonfinancial corporate securities market, you're seeing huge refundings, as well as new monies. India alone has got to do about $1 trillion of infrastructure financing over the next 5 years and hence, our CRISIL operation in India. I mean, it's a very robust picture, and it's following the capital demand needs.

Operator

Our final question comes from Ed Atorino with Benchmark.

[Technical Difficulty]

Harold Whittlesey McGraw

Ed, if you can hear us, we can talk offline as well. So if you're having trouble getting through, we can talk whenever you need.

Operator

That concludes this morning's call. A PDF version of the presenters' slides is available now for downloading from www.mcgraw-hill.com. A replay of this call, including the Q&A session, will be available in about 2 hours. The replay will be maintained on McGraw-Hill's website for 12 months from today and for 1 month from today by telephone. On behalf of The McGraw-Hill Companies, we thank you for participating and wish you good day.

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