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Executives

Donald Rubin - SVP of IR

Terry McGraw - Chairman, President and CEO

Vicky Tillman - Standard & Poor's, EVP

Bob Bahash - EVP and CFO

Analysts

Peter Appert - Goldman Sachs

Lisa Monaco - Morgan Stanley

Craig Huber - Lehman Brothers

Karl Choi - Merrill Lynch

Michael Meltz - Bear, Stearns & Co.

Edward Atorino - The Benchmark Co.

Alex Farman - Edgewood Management

Fred Searby - J.P. Morgan

TRANSCRIPT SPONSOR
Wall Street Breakfast

McGraw-Hill Companies Inc. (MHP) Q2 2007 Earnings Call July 24, 2007 8:30 AM ET

Operator

Good morning, and welcome to the McGraw-Hill Companies Second Quarter 2007 Earnings Call. At this time, I would like to inform you that the call is being recorded for broadcast and that all participants are in listen-only mode. At the request of the company, we will open the conference to questions and answers after the presentation and instructions will follow at that time.

To enhance the call for today's participant, McGraw-Hill has made the presenter slides available on the Internet. To do that, go to http://www.mymeetings.com/MC/join.

I'll repeat the URL once more for those who'd like to view the presenter slides online. It is http://www.mymeetings.com/MC/join.

You will be prompted to enter your name. The net conference meeting number is P as in Paul, G as in good, 1230632. The password is McGraw Hill, all caps with a space between McGraw and Hill, and the event type is conference.

This call is also being webcast live from McGraw-Hill's Investor Relations website and will be available for replay about two hours after this meetings ends, both by phone and on the web for seven days (Operator Instructions).

I will now turn the conference over to Donald Rubin, Senior Vice President of Investor Relations for the McGraw-Hill Companies. Sir, you may begin.

Donald Rubin

Thank you and good morning, and thanks everyone joining us this morning for the McGraw-Hill Companies second quarter 2007 earnings conference call.

I'm Donald Rubin, Senior Vice President for Investor Relations at the McGraw-Hill Companies. With me today are Harold McGraw, Chairman, President, and CEO; Robert Bahash, Executive Vice President and Chief Financial Officer; and Vicky Tillman, Executive Vice President at Standard & Poor's.

This morning, we issued a news release with our second quarter 2007 results. We trust you've all had a chance to review the release. If you need a copy of the release and financial schedules, they can be downloaded at www.McGraw-Hill.com/investor_relations. Once again that's www.McGraw-Hill.com/investor_relations.

Before we begin, I need to provide certain cautionary remarks about forward-looking statements. Except for historical information, the matters discussed in this 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 are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these 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 today on the call. However, this call is for investors and we would ask that questions from the media be directed to Mr. Steve Weiss in our New York office at area code 212-512-2247, 212-512-2247, and please do that subsequent to the call.

Today's update will last approximately an hour. After our presentation, we will open the meetings to questions and answers.

It's now my pleasure to introduce the Chairman, President, and CEO of the McGraw-Hill Companies, Terry McGraw.

Terry McGraw

Okay. Thank you, Don and good morning everyone, and welcome to our view of the McGraw-Hill Companies second quarter results. As Don mentioned, joining me today on today's conference call are Bob Bahash, who is Executive Vice President and CFO; also, Vicky Tillman is Executive Vice President of Standard & Poor's. She is the head of the Credit Market Services and our Chief Rating Officer.

I'll begin by reviewing our results for the second quarter and the outlook for the rest of the year. Then I've asked Vicky Tillman to provide some context for some of the recent rating decisions at Standard & Poor's credit market services, and then Bob will review our financial performance and then, of course, we're pleased to take any questions or comments that you have about the McGraw-Hill Companies.

Earlier this morning, we announced our second quarter results and for this period, we reported earnings per share increased 31.7%, which is $0.79. Revenue grew by 12.5% to $1.7 billion, and the operating margin improved in all three segments.

In looking ahead, we see reasonably healthy economic conditions. In fact, overall economic conditions are quite good, save the housing recession, which is costing United States about 1 percentage point of growth. Inflation remains moderate at 2.2%, which is at the top end of the Federal Reserve's comfort zone. So we expect more watchful waiting by the Fed before any interest rate adjustments.

Growth in the U.S. gross domestic product picked up in the second quarter. David Weiss, the Chief Economist at Standard & Poor's now expects GDP growth up 2.5% for the second half of the year and 2.1% for the full year and improving into 2008.

Again, David estimates that the housing recession has clipped about 1 percentage point of growth from the GDP for the U.S. this year and certainly, as we look at the housing recession, we're looking at new starts will probably bottom out by sometime by the end of the year.

He doesn't expect housing prices to bottom out until probably the spring of '08, and losses and foreclosures may not hit their peak until late 2008, but we're in the later innings of the housing recession. Non-residential construction continues to do well. State budgets are generally in pretty good shape and of course, that's very good for the education marketplace.

With that as background, let's now review our operating results and let's begin with McGraw-Hill Education. In the second quarter, there was more evidence that the good year we expected in the elementary/high school markets is certainly taking shape. In the second quarter, revenue increased 5.8%, operating profit grew by 18.6%, and the operating margin improved to 12.4%.

Revenue for the McGraw-Hill School Education Group was up 3.3%. Revenue for the McGraw-Hill Higher Education Professional and International Group was up 10.3%. This is a great time to be in the educational publishing with a well-established team and a well-developed growth strategy in place. We're building for a very promising future and certainly the 2007, '08, '09 and 2010 marketplace looks quite good.

Contrast with that with an industry in flux where we're seeing changes in ownership, changes in organization and consolidation that in effect reduces the number of major competitors from four to three in the elementary/high school market, all the changes and uncertainty will take some time to sort out. In the meantime, we expect to gain share this year, especially in the elementary/high school market and as well in the U.S. College and the University market.

We strengthened our School Education Group last fall by creating a single, well-coordinated K-12 team under the direction of our most experienced and successful managers. As a result, we are improving our performance in both the K-5 marketplace as well as the 6 through 12 market.

A broad and deep product lineup has always been important to us, because one size obviously definitely does not fit all in a large and diverse market. With its spectrum of products, we are performing well in both academic and non-academic subjects.

In non-academic subjects, we are on our way to achieving high market shares in small but profitable categories, such as health, business education, technical and vocational education as well as family and consumer science. A key factor in our performance will be the capture rates that we achieve in this year's rapidly growing state new adoption market.

We expect the state new adoption market to come in between $750 million and $800 million, a 10% to 15% increase over last year. We're anticipating in virtually the entire market this year versus about 80% in 2006. Much of the 2007 business remains to be decided, but based on current trends, we certainly expect to take more than 30% of the available dollars in the total state new adoption market.

Math and science offer the biggest opportunities this year for state new adoption sales and we're off to a very good start. Revenue for the school education group in the second quarter was driven by grade six through 12 math orders from Texas, K through 12 science orders from California, and K-8 science from South Carolina. We're optimistic about the performance of Treasures, that is our K through five-balanced basal reading program, which is competing well in Indian, Tennessee and Oregon.

Spotlight on Music is positioned to lead the state new adoption market in its subject. We are picking up new business in the second year of the California K through eight social studies adoption. The outlook is also promising in the grades six through 12 literature and reading market in Indian, Oregon, Tennessee and West Virginia.

In the open territory, we have won some major adoptions in large urban markets, but most small and medium-sized districts don't order until the third quarter, and we expect the open territory market to grow about 4% this year.

We will get help in achieving our open territory goals with the new addition of Everyday Mathematics, our reform-based program. The new addition is generating new business in Philadelphia, New York City, and Seattle and should be a leader in the K-5 New Mexico adoption.

The supplemental market has been soft this year, but this tends to be a second half business, so we'll have to wait and see how this works out. The market is looking for targeted skills-based intervention programs and we have created a strong lineup to meet the need at both the elementary level and the six through 12 level as well.

In testing, we experienced softness in both custom and shelf products in the second quarter, but we're getting wonderful traction with Acuity. And Acuity is our new formative testing that product as more educators look for research-based formative solutions.

Acuity is a suite of diagnostic and predictive benchmark assessments and it's designed to indicate student-learning needs and to track their progress towards mastery of state standards in English, language arts and math.

Last week Acuity won the largest formative testing contract yet awarded in the United States, a five-year, $80 million arrangement with New York City. Acuity has also been selected by Indianapolis, the biggest district in Indiana, and Mesa, the largest district in Arizona.

Acuity's close correlation with state standards, its strong research base, and our reputation for quality are creating a competitive advantage for this product in the testing market. And that's why Acuity algebra was selected by the Rand Corporation as the standard measure of student progress for a five-year study that's being funded by the U.S. Department of Education.

We're off to a good start in the U.S. College and University market. The big challenge, of course, occurs in the third quarter. Our three major imprints are performing well and we're gaining traction in digital products, which produce incremental revenue. Homework management products give students access to an interactive online textbook that allows them quick access to relevant content as they work on problems and practice quizzes.

Also proving popular with students are our new iPod and MP3-compatible features in our media-enhanced text and we're very pleased with the introduction of these as IPod icons are populating all of our higher education text.

In the second quarter, we also benefited from the publication of a McGraw-Hill classic, the 10th edition of the Encyclopedia of Science and Technology, a 20-volume work that we issue every five years and of course, we also provide this in an on-line version as well.

The encyclopedia is selling well here and also very well abroad. Our best sellers in the professional markets were Harrison's Manual of Medicine. It's in its 16th edition. The Millionaire Maker's Guide to Creating a Cash Machine for Life. Nursing Spectrums Drug Handbook for a 2008 imprint and the current Medical Diagnosis and Treatment 2007 in its 46th addition.

Therefore, summing up for the McGraw-Hill Education, a solid year, a very solid year is taking shape in education and we're very pleased with that. We expect the el-hi market to grow 5% to 7%. We expect the U.S. College and University market to grow about 4%. We expect to outperform both markets and we anticipate margin expansion in this segment for the full year.

Okay. With that, let's now turn to the financial services segment. The second quarter results underscore what by now is a familiar story. A diversified and resilient portfolio again produced substantial increases in global financial markets. In the second quarter, revenue increased 21.2%. Operating profit grew by 27.9% and the operating margin expanded to 48.9%.

There were many contributors to our success in the second quarter. First, there's Standard & Poor's unique blend of fixed income and equity services, which reduce our dependency on any single asset class. Second is financial service's strong and growing position in international markets, a 10-year compound annual growth rate of 18.9% by financial services in international markets through 2006 underscores that point.

Third is our growing array of new services and both fixed income and equity markets. And fourth is the durability of powerful growth trends in our market, the securitization issue, the globalization, privatization, and of course the continued disintermediation movement away from the banks into the capital markets. All of these factors contributed to our performance this year.

In the second quarter, the obsession with subprime issues obscured some very, very positive trends in the ratings market. International markets grew at a double-digit rate and contributed 38.9% of ratings revenue in the second quarter, up from 36.6% for the same period a year ago. The U.S. corporate market set a new record for issuance for the second quarter in a row, as both U.S. investment grade, which was up 33% and high-yield, which was up 42.6%, grew substantially.

Public finance coming off a slow second quarter last year grew solidly because of new money issuance, but also because of refundings. Structured finance was strong globally, despite a 12.4% decline in the dollar volume issuance of residential mortgage-backed securities in the United States.

There was strength in the European residential mortgage-backed securities market, where subprime is not the factor it is here. In fact, we saw solid performance in all asset classes in Europe. The commercial mortgage-backed mark -- the commercial mortgage-backed securities market grow solidly here, but also very much so abroad. In the United States, the collateralized debt obligation market met our expectations.

During the conference call on the first quarter earnings, we said that new issuance dollar volume would grow by about 60% in the second quarter and it grew 58%. We saw modest gains in the asset-backed securities market. And another example of our diversity, ratings and services not directly tied to public new issuance also grew at a double-digit rate in the second quarter.

These offerings, which we refer to as our nontraditional ratings, accounted for 22.6% of ratings revenue in the second quarter compared to 24.1% for the same period last year. Bank loan ratings were the key driver here.

Standard & Poor's is also a leading provider of data and information, analysis, and other service for the equity market, including our expanding lineup of indices. Our client base at Capital IQ continues to grow and we're very pleased with that. We're now at approximately 2,000 customers. That's a 29% increase over the prior year.

More new clients and new services that increase penetration at the ones we already serve should keep this business growing very nicely. We are confident that we have strengthened our position in this market with a recent acquisition of ClariFi, which is off to an excellent start, as the newest addition to the S&P family.

In the data and information market, we are also seeing good growth from S&P Compustat, RatingsDirect, and RatingsXpress. Assets under management based on S&P indices continue to increase. It was up 20.9% at the end of June to $178.6 billion. In June, trading began on nine new exchange-traded funds based on S&P indices. 30 have been launched so far this year, bringing the total to 127 the total number of exchange-traded funds based on S&P indices.

The S&P Citigroup indices formed the backbone of the new fast growing opportunities to create customized indices and benchmarks. We are successfully licensing the recently acquired commodity indices from Goldman Sachs. Recent licensees for the S&P GFCI indices include: Morgan Stanley, Barclays Bank, Deutsche Bank, the National Bank of Canada, UBS, Wachovia, and Cargill, the pipeline is growing.

And speaking of pipelines, let's spend some time now on the outlook for the second half. As we've pointed out, we expect low double-digit growth at financial services in the second half probably tougher comparisons will make the fourth quarter a little bit more challenging.

Corporate issuance is off to a strong start in 2007, there is a large new issuance -- new issue calendar, an attractive financial environment, merger and acquisition activity and balance sheet restructuring is going to help to continue to drive this market.

As the chart shows, the fourth quarter last year was the biggest in 2006 for dollar volume issuance in the U.S. corporate market. In Europe, the corporate sector is off to a solid start and the current pipeline of business is strong, and it's across all sectors. Dollar volume issuance in the U.S. public finance started the year on an upswing, but even though this may be a record year for issuance, we expect somewhat slower growth for the balance of 2007.

Dollar volume issuance in the U.S. residential mortgage-backed securities market is off 11.6% in the first half of this year and we anticipate a further decline in the second half. We now estimate that dollar volume issuance of U.S. residential mortgage-backed securities will decline by 15% to 20% this year. Our prior guidance here was 10% to 15%, and we think maybe just a little bit more up to about 20% is right.

Activity is being driven primarily by Alt-A and net interest margin security deals and the refinancing of adjustable rate mortgages, many potential deals are on hold as issuers reprice to the new criteria and gauge the market's appetite for residential mortgage-backed securities.

The U.S. commercial mortgage-backed securities market is up 36.8% in the first half, and of course that's driven by low interest rates and strong commercial real estate fundamentals, but the pipeline for commercial mortgage-backed securities is robust.

Dollar volume issuance in the U.S. asset-backed securities market is up 22.5% for the first half and the pipeline looks very solid. The U.S. collateralized debt obligation market; CDO market soared last year and is off to a fast start in 2007. We expect more growth in the collateralized debt obligation market in the second half, but at rates well below the blistering pace established in the third and the fourth quarters last year.

Collateralized loan obligations CLO, net market cash, hybrids, and synthetics continue to benefit from investor demand, ample liquidity in the market, and broader acceptance as structures such as the collateralized debt obligations of commercial real estate. In Europe, the pipeline for structured finance products looks very good.

We expect a solid second half with all asset classes showing strength with the toughest comparison coming in the fourth quarter. We also expect a solid second half from our data, information, and indices.

So let's sum up for financial service, continued strength overseas, more growth in the structured market, solid prospects in the corporate market, growing contributions from data, information, and indices, low double-digit growth in the second half, margin expansion for the year.

But no summary of the outlook for financial services at this time would be complete without a reference to a significant recent federal court decision and some discussion of the decisions S&P has made in the subprime and the CDO markets.

On June 5, the federal court reaffirmed the strong legal protection afforded rating agencies in dismissing a complaint against the ratings agencies brought by the attorney general of the state of Connecticut on behalf of the state's resources recovery authority, the federal district judge in Houston, Texas, emphasized the significant public policy reasons for not imposing liability on credit rating agencies for their opinions.

And I quote from that decision, "Imposing such liability would open the flood gates of litigation against credit rating agencies by disappointed investors or creditors, and chill the agencies from vital and vigorous participation in the ratings process and the marketplace, where the free flow of information and conflicting views ideally establish reality."

In recent days, Standard & Poor's has announced some important decisions in the subprime market, and that's why I've asked Vicky Tillman, again Executive Vice President of S&P and she heads the credit marketing, the market services and our Chief Rating Officer and asked her today to share some of S&P's perspectives on the rating process and those market conditions.

Vicky, will you make your remarks?

Vicky Tillman

Thank you, Terry. There's been a great deal of commentary recently about the deterioration of the subprime market. Not all of it has been particularly insightful or accurate, so we think it's important to share with you Standard & Poor's' perspective on market conditions and our ratings. In the brief time, I have this morning I would like to make five key points.

First, the current situation did not develop overnight. For more than a year, Standard & Poor's have been signaling the market about the deterioration in residential mortgage-backed securities backed by subprime loans and their potential affect on credit worthiness.

Second, S&P continues to alert the market to new problems. On June 2nd, for example, we commented to the market about emerging issues with collateral debt obligation. S&P said that covenant-like juggernaut is raising CLO risks and that we were raising the collateralized loan obligation loss criteria to reflect potential expectations of increased loss exposure on covenant light loans.

Third, we do not structure or engineer transactions nor do we arbitrate on which deals can or cannot proceed. Our guidelines and criteria are publicly available.

Fourth, criteria is a factor in whether or not Standard & Poor's is selected to do a rating. Tightening criteria may have an adverse impact on our market share, but we will continue to develop and adjust our criteria to reflect how changing conditions impact credit risk. We are driven to improve our ratings process because it is our excellent track record that makes Standard & Poor's a rating agency of choice.

Fifth, the performance of Standard & Poor's structured finance ratings has been exceptionally strong over a long period of time. Our regularly published default studies show the clear relationship between the initial ratings signed by Standard & Poor's and the likelihood of default.

Since 1978, the average five-year default rate for investment grade structured securities is 0.87%. The default rate for speculative grade securities is 15.42%. We identified heightened credit exposure with so called affordability products and the layering of multiple risk factors in loan programs over a year ago and adjusted our assumptions going back to April 2006.

In any rating decision, we are concerned about the duration and the severity of issues affecting future credit performance. We need sufficient time and data to show how collateral pools are performing. Our recent actions are a continuation of that view in applying our adjusted assumptions to the delinquency default and loss trends to make decisions on some of the RMBS transactions.

Let me quickly sum up our latest actions in July. S&P downgraded 562 classes of rated RMBS transactions that were backed by first lien subprime loans from the fourth quarter of 2005 through the fourth quarter of 2006.

It's worth noting that the $6.3 billion of securities represented only 1.1% of all the first lien subprime RMBS deals rated during this period. We also downgraded 418 classes of S&P rated RMBS transactions, which were backed by closed-end second liens. That represented $3.8 billion in volume or 6.1% of this class.

As a result of the first lien subprime downgrades, 74 synthetic CDOs were downgrades, 19 classes of cash flow and hybrid CDOs were placed on CreditWatch Negative, 17 classes of cash flow and hybrid CDOs were placed on CreditWatch Negative as a result of the closed end second lien downgrades.

And yesterday, an additional 33 tranches from eight U.S. cash flow and hybrid CDOs were also placed on CreditWatch Negative. Again, the result of downgrades of the first lien subprime transactions. The downgrades we announced on the first lien subprime collateral did not impact any AAA ratings.

Also note that while eight classes of the AAA second lien RMBS deals were downgraded, none of these ratings fell below investment grade. Of course, we will continue to monitor these issues and will take any further rating actions we deem to be appropriate.

In fact, the actions we have taken in July are part of Standard & Poor's ongoing process of adjusting its assumptions and ratings to reflect current trends in the housing market, the mortgage finance market, consumer credit, and the overall economy as they move overtime.

We have provided the market with information on our approach for rating new CDOs containing RMBS securities, which are backed by nonprime collateral, and S&P is currently reviewing RMBS transactions, which are backed by Alt-As and the net interest margin collateral. That will be completed over the next several weeks.

Transactions issued after January 2007 have not had adequate seasoning. We are monitoring these transactions under new assumptions and will take such ratings actions as we deem appropriate and as more loss data becomes available. In our view, loans made prior to January '05 are not at the same level of risk as those made since then.

I'll wrap up with one final observation. Our role is to provide an independent opinion on credit worthiness based on demonstrable facts. Sometimes that puts us at odds with the ebb and flow of market sentiment. While the market doesn't always agree with our ratings, we take a longer-term view and do what we believe is right for the market.

And I would make one further note. Tomorrow, Standard & Poor's structured finance group will be holding a teleconference discussing the details of the downgrades that I have gone over with you today, as well as some future actions and the changes and assumptions that we have made, and I encourage any of you that are interested in this detail to please dial in. The teleconference facts will be made available today. Thank you.

Terry McGraw

Okay. Thanks very much, Vicky. And now let's take a look at the information and media segment. Growth in information products and some shortfalls in advertising were the hallmarks of this segment's second quarter performance.

In the second quarter, revenue grew by 4.7%, operating profit increased by 13.1%, and the operating margin was 5.9%. The segment benefited in the second quarter from the change in accounting for the transformation of Sweet, and I'm going to ask Bob Bahash to cover that in his financial comments. In the second quarter, Sweet's contributed an incremental $6.5 million to revenue and $5.8 million to operating profit.

In the Business-to-Business Group, revenue increased 7.9% to $223.1 million. This group includes some of our company's best-known brands: J.D. Power and Associates, Platts, BusinessWeek, and McGraw-Hill construction and Aviation Week.

Information products and services were a key to our progress in the B to B Group. The incremental revenue from Sweets due to the accounting change was part of the picture. But we also had contributions from Platts News and pricing services for oil, natural gas, and power markets.

The price of energy commodity continues to be volatile and is driving demand for our news and pricing services. We also benefited from the new J.D. Power and Associates studies in the financial services and healthcare sector, as well as increased penetration from existing studies.

Listening to the voice of the customer is a powerful concept and we continue to build on it. Advertising pages for BusinessWeek's global print addition were off 20% in the second quarter, and that's according to publisher's information bureau figures.

BusinessWeek.com though continues to expand. The new company Insight center, utilizing Capital IQ's extensive database of company fundamental data is attracting a global audience. Search traffic has been growing steadily since the launch.

Revenue for the broadcasting group declined by 16% to $26.8 million in the second quarter, in obviously a nonelection year. Automotive, a key category was also off sharply. Political campaigns are starting sooner and lasting longer.

So while 2007 is not an election year, we may still have some political advertising in the second half. At the moment, broadcasting's third quarter pacing is off 4%. Summing up for information media, a soft year in advertising, growth in information services, and margin expansion for the full year.

That completes our review of the three operating segments. And so summing up then again for the full corporation, we expect to achieve our goal of double-digit earnings growth in 2007, even though the growth rate will probably be slower during the second half of the year as compared to our very strong first half performance.

Although we expect low double-digit growth from financial services in the second half, tougher comparisons year-over-year will make the fourth quarter more challenging. Some operating margin compression may occur in our segments in the second half, but we still expect improved operating margins in all three operating segments for the full year.

So with that, let me leave that and let me go over to Bob Bahash, and then we'll take your questions.

Bob Bahash

Okay, thank you, Terry. I'll start with an update on our share repurchase program. We began the year intending to buy 15 million shares in 2007. After we purchased 13.2 million shares during the first quarter, the Board of Directors at its April meeting approved an increase of up to an additional 15 million shares, bringing this year's total repurchase authorization to up to 30 million shares for 2007.

In the second quarter, we repurchased 6.3 million shares on a trade date basis at a total cost of $431.6 million. That brings the first half repurchases to 19.5 million shares for approximately $1.3 billion. 0.5 million shares remain available to be repurchased under the 2006 buyback program and 45 million shares remain under the 2007 program.

Since 1996, the corporation has returned $7.3 billion to shareholders through dividend payments and share buybacks, including more than $1.4 billion return to shareholders in the first half of 2007.

The diluted weighted average shares outstanding for the second quarter of 2007 is 350.3 million shares, a 15.2 million share decrease compared to the second quarter of 2006, and an 11.2 million share decrease compared to the first quarter of this year, of course due to the impact of share repurchases.

We've ramped up our borrowings to fund the additional share repurchases and seasonal cash requirements and ended the second quarter in a net debt position of approximately $636 million, which is up from a net debt position of $178 million at the end of the first quarter.

As of June 30, on a gross basis, our debt is $994 million, offset by $358 million in cash, primarily foreign holdings. This debt reflects a diversified mix of short-term borrowings in the commercial paper, extendible commercial note, and money market loan markets.

Interest expense is $12 million in the second quarter, a $3.5 million increase compared to last year due to the borrowing. If market and business conditions support the completion of the full 30 million share repurchase program for 2007, we'd be in a net debt position at year end.

We'd also expect the full-year interest expense to range between $40 million to $42 million, again if we complete the whole program, up from our previous estimate of $24 million to $26 million due to the -- primarily the additional 15 million shares of repurchases.

As we discussed last quarter in 2006, we transformed Sweets, McGraw-Hill Construction Group's popular building products database from a primarily print catalog to a bundled print and online service.

The associated accounting change benefited year-over-year comparisons for information and media. Second quarter 2007 results reflect $6.5 million of incremental revenue and $5.8 million of incremental operating profit resulting from the Sweets transformation.

Let's take a look now at the corporate expense. Corporate expenses increased $7 million or 20% in the second quarter compared to a year ago, and it's primarily attributable to several factors. First, expenses associated with the new business process management program that's focused on our core processes and insuring alignment with customer needs while improving operational efficiency.

Higher incentive compensation accruals due to better operating performance, our corporate advertising program, which I'm sure many of you have heard and an increase in vacant space from downsizing and business rationalization initiatives implemented in 2006.

The effective tax rate in the second quarter was 37.5%. We expect to maintain this rate for the balance of the year. Let's take a look at capital expenditures, which include prepublication investments and purchases of property and equipment.

In the second quarter, our prepublication investments were $75 million compared to $63.5 million for the same period last year. For 2007, we continue to project that prepub investments will be about $310 million.

Purchases of property and equipment were up significantly this year to $60 million compared to only about $20 million for the same period last year. The increase is driven, of course, by the construction of our new data center, which is underway and is expected to be completed in the first half of 2008, along with the technology investments we're making to digitize our products and services. We continue to project $250 million for 2007.

Now for some non-cash items, amortization of prepublication costs was $57 million in the second quarter compared to $53 million for the same period last year. We ramped up our publishing schedule last year in anticipation of the very strong el-hi new state adoption opportunities in 2007, 2008, and 2009. And we continue to expect $260 million in amortization of prepublication costs for 2007.

Depreciation was $29 million for the second quarter compared to $28 million for the same period last year, and we expect $130 million for the full year, reflecting the higher level of capital expenditures in 2007 and full-year appreciation for capital expenditures paid in 2006. Amortization of intangibles was $11.5 million compared to $12 million for the same period and we expect $50 million for the year.

And, finally, unearned revenue grew to over $1 billion in the second quarter, which is up from $893 million for the same period last year, reflecting an approximately 15% year-over-year growth driven by continued growth in financial services.

Last year included a mutual fund data business that was divested in March 2007. Excluding the fund business, the year-over-year increase would be even slightly higher than the 15%. Thanks. And now back to Terry.

Terry McGraw

Okay, thank you, Bob. And that completes our prepared remarks. We're very pleased with the start of the first half of this year. It obviously, was stronger than we expected and we're very pleased with that and we look forward to completing the year in good fashion with our guidance of double-digit earnings growth.

With that let me turn it back to Don, and we'll go in any direction you'd like.

Donald Rubin

Thank you. Just a couple of instructions for our phone participants (Operator Instructions). We'd now like to take your first question.

Question-and-Answer Session

Operator

Thank you. Our first question comes from Peter Appert with Goldman Sachs. Please go ahead.

Peter Appert - Goldman Sachs

Thank you. Terry, you referenced in your remarks the potential for possibly some margin compression in the second half of the year. I assume you're referring primarily to S&P. So, could you quantify potentially with you think the risk to margins might be in the second half?

And then secondly, just confirm that you were referencing S&P, or do you expect to see as well some margin pressure at the education and info services segment?

Terry McGraw

Thanks, Peter. No, as we said coming into this year, we expect margin improvement in all three segments and that will be the case. In the second quarter, for Standard & Poor's, the margin was 48.9%. Obviously, that's quite strong.

We did 43.9% at the end of last year and we said that each year going forward we expect margin improvement at S&P and that guidance continues. I don't think it's fair to say that we're going to be at 48.9% by the end of the year. But, we still expect margin improvement and continued strength that way there.

On the education side, we've been very clear in terms of what our goal is and what our expectations are, and we've worked hard at this and we're off to a very good start in the K-12 space and a good start to the higher education year.

So, we expect improvement here and we expect improvement, again, in each year going forward and the same thing with information media. So, we're off to a very good start to a year. When you have earnings at 31.7% in the second quarter, I don't think we can keep that pace going. So, the second half will be at a little less of a rate on that one, but we expect to finish the year with double-digit earnings.

Peter Appert - Goldman Sachs

Right. Right, I understand that, obviously, you start very strongly and you expect the year to be up on a full-year basis, but I was specifically asking about the second half and let me be more precise then.

For the education business in the context of the revenue momentum you've seen, do you think you can sustain positive margin comps in the second half of the year?

Terry McGraw

Again, I would keep to where we are at, Peter, that we're going to see margin improvement here. Obviously, the third quarter is a big quarter in the education marketplace and we have to see how that comes. But, we like our position right now and we'll see.

But, again, we expect margin improvement there and I think we have to see how this third quarter materializes to make any predictions that way. And for the financial services side, Peter, we expect double-digit top and bottom growth in the second half.

Peter Appert - Goldman Sachs

Okay. Thanks. But, could I just ask one brief follow-up for Vicky, perhaps. There's been some discussion in the market about issuers shopping more aggressively for ratings in the context of some of the criteria changes you've talked about. So, do you see any impact there, Vicky, if terms of the pipeline in your own business on a near-term basis?

Vicky Tillman

Well, actually, as I indicated, we have been changing criteria at some of our assumptions and adjustments around it in a number of the different asset classes. I mentioned specifically residential mortgages, some of the covenant light, as well as commercial-backed, mortgage-backed securities. While that does sometimes have an impact because our subordination levels may increase and the types of protection that we have to have in deals may in fact sway issuers potentially not to come to S&P.

But, we believe in the long run because by the way we're transparent in the market, and I think in the forefront in terms of allowing the market to understand why we do what we do that ultimately we're going to end up the year in a very good position relative to market share.

Peter Appert - Goldman Sachs

Okay, thank you.

Bob Bahash

Peter, let me just add a comment on the education margin for the second half of the year. As you know, Terry had indicated that we have very strong outlooks for performance and science and in math and some of our big areas and we plan on doing very, very well.

Coupled with that, though, is very high marketing costs, as you know, free with order, etc., and they tend to place a little bit more pressure on margins in that initial sale period. So, we're expecting a little bit of pressure on the margins in the third quarter as well as the fourth quarter.

But, we believe that our year is really excellent because of the penetration in terms of the adoption characteristics that we have, but nevertheless, we're going to experience a little bit of margin pressure in the third and fourth quarter. We're trying to see what we can do to offset some of that, but nevertheless, that's about where we are right now.

And that's why Terry had mentioned in his remarks that we expect some compression in margins for all the segments in the second half of the year.

Peter Appert - Goldman Sachs

Okay, thanks. That's helpful.

Operator

Thank you. Our next question comes from Lisa Monaco with Morgan Stanley. Please go ahead.

Lisa Monaco - Morgan Stanley

Good morning. Terry or Vicky could you just give us some color in terms of how much did second quarter at S&P come in better than expected and what are you seeing in the pipeline?

Is the pipeline more robust than you had been seeing, three months ago, or, were some deals pushed into 2Q ahead of some of these headlines about subprime we've seen? And then I have a follow-up.

Terry McGraw

Okay, thanks, Lisa. Well, the fact that we have Vicky, here, I'm going to take advantage of that on that one, but let me begin by just saying that economic conditions worldwide are quite strong and are quite good.

The corporate activity that we're seeing is impressive. We're looking at very, very large merger and acquisition activity and the whole corporate and government sector is benefiting from that.

In terms of other asset categories we're also seeing enormous growth, not only here in the states, but in Europe and in Asia, as well. And we're benefiting from that, both in the asset-backed mark, the commercial mortgage-backed market, the CDO market, and so forth.

Certainly, the housing recession in the United States is costing the United States at least 1 percentage point of growth. We'll probably finish up the year at GDP growth of that 2%, 2.5%, but it would be 3%, 3.5% if not for the housing recession and it's, the housing recession is winding down.

And by the end of '08, we should be in a very different position. So the subprime market has been a smaller piece of the overall equation and yes, that's had an affect. But, the growth in the second quarter is an affect because of the growth worldwide and the push for structured instruments and the M&A activity.

And, Vicky, would you like to respond to that?

Vicky Tillman

Well, you pretty much covered what, and I would reiterate what you said. The fact that in the second quarter, I think the fact that, what was record issuance for corporates, I think Terry mentioned that it was a 34.5% increase, so a lot of the corporate issuance that we have seen probably over expectations.

Again, the other element of the experience that we're having is in our nontraditional products and in terms of the bank loan ratings that we're seeing tremendous push, not only in the U.S., but we are very much beginning to penetrate at a much more substantial rate, European bank loan market as well.

So in that regard, I think some of the experience we saw was actually at record breaking and that was unexpected, but it was good news and we see the fundamentals are continuing through the second half.

Lisa Monaco - Morgan Stanley

I guess, just to clarify on that, in terms of your second half outlook for S&P, is it about where you expected two three months ago or was some of that pulled into 2Q?

Terry McGraw

Well, again you're dealing with market conditions and it was a little bit more robust in the first half than we expected. Our guidance for the rest of the year is double-digit top and bottom line for S&P. But obviously at a lower rate than the very, very hot first half.

Lisa Monaco - Morgan Stanley

So, sorry to beat a dead horse, but there's been all these headlines about deals being sidelined in terms of debt deals, is that impacting your business or are strength in other areas offsetting that?

Terry McGraw

Yes, I would expect that, that, again especially in the subprime and Alt-A area, there's going to be more caution going forward and I think that there will be some pressure on that, but again that is a smaller percentage of the overall ratings activity and we'll just have to see how that materializes in the third quarter, but I think it's fair to say that there'll be some softness in that.

Vicky Tillman

Well, we saw some pullback, but I think a lot of that, as Terry indicated before was a re-pricing in the deals. But we do see a strong pipeline coming in and as it relates to some of the loan market, what you're seeing is that they, especially with regards to CLOs they're coming in with a more selective and tighter covenants, as opposed to some of the light covenants that you've seen in the past. So there was some of that, but the pipeline is looking good.

Lisa Monaco - Morgan Stanley

And then just on the margin front for financial in the second half, are there any unusual expenses we should think about or is there any ramp-up investment spending that we should think about, just when we model out the margins?

Terry McGraw

Well, again, as you know, we're investing very heavily on the financial information side and we're very, very pleased with the customer penetration with Capital IQ and the progress we're making there, and the acquisition in the second quarter of ClariFi. And we will continue to make those investments, but nothing out of the ordinary from that.

Lisa Monaco - Morgan Stanley

Okay. Great. Thank you.

Terry McGraw

You bet.

Operator

Thank you. Our next question comes from Craig Huber with Lehman Brothers. Please go ahead.

Craig Huber - Lehman Brothers

Yes. Good morning, just a couple things. Just to clarify this paragraph in your press release about the outlook. It just says low double-digit growth for financial services in the second half. Just to be clear, are you talking about the top line there operating profit, or both?

Terry McGraw

Both.

Craig Huber - Lehman Brothers

Okay. And then also I think Bob, you mentioned just briefly you were expecting margin compression across all three segments in the second half is that correct?

Bob Bahash

That's correct, yes.

Craig Huber - Lehman Brothers

Okay. And then lastly, just to clarify this your subprime exposure on your ratings business, is it roughly about 5% of your revenues for that segment?

Bob Bahash

Well, we don't break that out as such, but if you take a look at just the mortgage loan volume outstanding, subprime is only about 13% of that total market. So you're correct in the assumption that it is a smaller piece of that configuration.

And, again, when you start moving up the credit curve and get into CDOs, you're seeing very, very strong growth and as I said in the second quarter, they were up 58%.

Craig Huber - Lehman Brothers

So it sounds like you don't feel you're seeing fall off another round of subprime is going to slightly different classes?

Bob Bahash

Again, everybody's watching the same picture and the question is, is there a spillover effect in the economy of subprime, and I think both, we've heard from Secretary Paulison and also Fed Chairman, Bernanke, saying that there is not a spillover and we're not seeing that.

And so, again, I think we're coming towards the end of the housing recession. We're looking at new starts bottoming out probably by the end of the year, and a little bit more to go in prices by spring of next year, probably about another 6% price decline to go.

And then we'll see some loss exposure and foreclosures probably through the end of next year. But, again, it's a smaller portion of the housing recession and from our standpoint, the strength in other areas are obviously doing quite well.

Craig Huber - Lehman Brothers

And then lastly, if I could you mentioned total new issued dollar volume up 15.3% in the second quarter. According to Thompson, it looks like that data slowed significantly in the month of June. Can you verify that? And then it sounds like from your comments you believe it's going to rebound in July and August, but what's your thoughts? Thank you.

Terry McGraw

Yes, well, there's two parts to that. One, we don't break out monthly data. But as Vicky said, the pipeline is quite strong and we don't see that letting up. But new issuance was just a little bit over 15% in the United States. The big one, though, Craig is that in Europe new issuance is over 33%. And we see that across the board in all asset categories.

So that's going to be a stronger project. And remember now almost 40% of S&P's activity is outside the United States now growing at a faster rate than domestically. And we're going to continue to see that, that trend materialize.

Craig Huber - Lehman Brothers

Great, thank you.

Terry McGraw

Thanks, Craig.

Operator

Thank you. Our next question comes from Karl Choi with Merrill Lynch. Please go ahead.

Karl Choi - Merrill Lynch

Hi. A couple of questions here, first, Terry, your comment about the fourth quarter for S&P being a little bit more challenging in terms of comps, it's a little bit early. But comps will remain difficult for all of '08.

Then, given what's going on in the sub-prime market? And if some maybe liquidity growing out of the credit market here. Does this change your confidence about S&P's ability to deliver double-digit topline growth next year?

Terry McGraw

Well, it's a little early to get into 2008, I want to get through this year on this one. I feel very good about our guidance on double-digit growth, top and bottom line for S&P for the remainder of the year; albeit, it's going to be at a lower rate and we have to see what the affect in some of the sub-prime there.

But, again, it's going to be a smaller impact because of the strength overall, globally as well as in the corporate market, but on, our planning process that is underway now for 2008. I think 2008 for Standard & Poor's is going to be a very good year, but it's too early to quantify that.

And so, we'll give guidance come December on what we expect on that one, but I have every reason to believe that it's going to be a very good year.

Karl Choi - Merrill Lynch

Okay. Second question is on management incentive compensation, based on what I can see from proxy, from your proxy, it looks like in the past management's incentive compensation maxes out when EPS growth is at 15% or so, has that changed for 2007?

Terry McGraw

No.

Karl Choi - Merrill Lynch

Lastly, I guess the question may be for Bob...

Terry McGraw

And by the way, again, in terms of executive compensation. For it to kick in -- to begin, it has to be double-digit growth. We feel very strongly on that given our markets and the growth drivers associated with those markets that our drive and desire is double-digit earnings growth. And therefore, we've aligned our set of process to kick in only with double-digit growth.

Karl Choi - Merrill Lynch

And lastly, a question on the deferred revenues, over what period of time do you expect to amortize the deferred revenues into your income statement?

Bob Bahash

Generally, that's over an annual basis.

Karl Choi - Merrill Lynch

Great. Thank you.

Bob Bahash

Thanks, Karl.

Operator

Thank you. Our next question comes from Michael Meltz with Bear, Stearns. Please go ahead.

Michael Meltz - Bear, Stearns & Co.

Hi, it's Meltz over here, two questions for you. Bob, I know the margin question's been asked a few time here. But you're saying margin's down year-over-year down in the second half, I'm not quite sure why the S&P margins would be down, I understand why the other two segments.

I would like you to maybe clarify that a little bit. And then in that context, do you think with your comments about margins, your comments about interest expense. Do you think consensus -- full-year consensus of 305 is achievable? And I have one follow-up.

Bob Bahash

First off, I'm not going to comment on consensus. But let me talk to the margin issues. First off, S&P was off to, as you know a very strong start, first half, second half. And we had posted some very, very attractive margins there. What we're simply suggesting is that the growth rate, albeit double-digit, will be significantly slower than in the first half of the year.

And as a result, the margins will come in closer to the margins that we had achieved last year in the third and fourth quarters. So, this is not a collapse of margins, this is simply margins coming back to being more inline with what we had achieved last year versus the much higher margins that we achieved because of the very, very strong growth that we achieved in the first and second quarters of this year.

So hopefully that clarifies the issue with regard to margins for financial services.

Michael Meltz - Bear, Stearns & Co.

You're saying closer not necessarily down?

Bob Bahash

It's -- I'm saying right in that zone. It's very difficult to predict precisely, because our estimates are looking relatively close. And I'm saying relatively close to our performance of last year in the third quarter and in the fourth quarter. So, yes, I'm saying, but down in relation to where they were.

Michael Meltz - Bear, Stearns & Co.

I understand.

Bob Bahash

But in relation to last year, relatively close to where our performance was last year.

Michael Meltz - Bear, Stearns & Co.

Okay. Okay. One question. Vicky, you commented about the market share and I just want to make sure I understand. In RMBS or in CLOs, are you actually not getting deals at this point, similar or akin to Moody's comment last year? Or are you just mentioning this is something that could happen?

Vicky Tillman

I'm mentioning that we're going to adjust our criteria as we see fit. And if that requires higher subordination levels and higher support levels it's then up to an issuer to make that choice, in terms of whether they're going to go with S&P or not. To-date we have made moves in adjusting our criteria.

And again, and in some regards, especially in a collateralized mortgage-backed securities area as you probably have read, we saw the changes in the real estate market a while ago, saw that the leveraging and the structuring of the deals and the underwriting was beginning to really begin to deteriorate somewhat.

And even further in the first quarter of '07, at which point; again, we called it like it was and just you know raised our requirements in terms of ratings. This can in fact have an adverse impact on whether they come to Standard & Poor's or not. But that's not what we're concerned about, we're concerned about calling it as it is.

Michael Meltz - Bear, Stearns & Co.

And I understand. But, my question is, do you think you have lost deals because of tightened standards in the past month and a half?

Vicky Tillman

Not that I know of.

Michael Meltz - Bear, Stearns & Co.

Okay.

Terry McGraw

It's more that it will be what it is as we go into the third quarter. But no, at this point, we don't see any.

Michael Meltz - Bear, Stearns & Co.

Okay. And last question. What were the shares out at the end of the quarter, please, diluted?

Bob Bahash

Just a minute. We'll get that for you.

Terry McGraw

Shares were what, 350.3 million?

Michael Meltz - Bear, Stearns & Co.

That was the weighted for the quarter, what was it at the end?

Bob Bahash

Yes, for the quarter -- roughly 350.3 million.

Michael Meltz - Bear, Stearns & Co

Weighted for the quarter and end of quarter? I'm asking for the end of quarter?

Bob Bahash

That's weighted for the quarter.

Michael Meltz - Bear, Stearns & Co.

No, I know. But I'm asking what it was at the end after all the repurchase?

Bob Bahash

Okay. We'll get you that.

Michael Meltz - Bear, Stearns & Co.

Okay.

Bob Bahash

We'll pick it up somewhere during the call here.

Michael Meltz - Bear, Stearns & Co.

All right. Thank you.

Terry McGraw

Okay, Michael.

Operator

Thank you. Our next question comes from Edward Atorino with Benchmark. Please go ahead.

Edward Atorino - The Benchmark Co.

Yes. I had a question on shares, which you'll answer. On interest expense, if you did not finish your purchase, would we -- would you set $12 million interest expense for the rest of the year per quarter?

Or to put it another way, what would interest expense be for the rest of the year if you did not complete the share buyback?

Bob Bahash

If we did not, we will be, I think I had said something in the $42 million to $44 million range, If we complete it, the whole thing, probably somewhere around $30 million or so.

Edward Atorino - The Benchmark Co.

Okay. Thanks much.

Terry McGraw

Thanks, Ed.

Operator

Thank you. Our next question comes from Alex Farman with Edgewood Management. Please go ahead with your question.

Alex Farman - Edgewood Management

Congratulations on a good quarter. Are there any other suits like the June 5th suit that we should know about and where do they stand?

Terry McGraw

Alex, could you say that again?

Alex Farman - Edgewood Management

Are there any other suits like the suit that you just mentioned, the June 5th ruling, and where do we stand on those things?

Terry McGraw

No, there are no other suits and I don't anticipate them. Again, we are dogged in terms of the compliance function to our process and procedures and that's what we monitor very carefully. And, of course, we worked with all government agencies in terms of doing that, but there are no suits outstanding.

Alex Farman - Edgewood Management

And, the international growth, what percentage of it...

Terry McGraw

Yeah. Alex, you're breaking up there, and we can't hear you very well. But if the question was on international growth, and it's about for S&P, it's about 19%. And it's growing at a very good rate and will continue at that rate for some time.

Alex Farman - Edgewood Management

Thank you.

Terry McGraw

Thanks, Alex.

Operator

Thank you, our final question comes from Fred Searby with J.P. Morgan; please go ahead.

Terry McGraw

Fred?

Operator

Fred your line is open. Please check your mute button, we're not able to hear you.

Terry McGraw

We're not hearing anything, operator.

Operator

Yes. I'm not exactly sure what is wrong with his line.

Fred Searby - J.P. Morgan

Hello.

Terry McGraw

Yeah. There we go, Fred?

Operator

We can hear you now. Fred, please go ahead with your question.

Fred Searby - J.P. Morgan

Sorry about that Terry, a couple questions. First CDOs, I just, it looks actually like you made a pretty accurate prediction for the second quarter. Just came in slightly below I think you'd said 65% originally.

Terry McGraw

Right.

Fred Searby - J.P. Morgan

What would you think in terms of the third quarter, and then secondly, a follow-on on Michael Meltz' question. But I would have thought that what I've gleaned that you would have actually gained market share because of Moody's tighter, more stringent rating criteria in CMBS. So, I would have thought you would have some benefit, or is Fitch really, I guess Fitch would have been the principal beneficiary.

Could you just elaborate somewhat on that, and then finally just ABS I was surprised. It was a little better than we thought it would, can you give us some components or thoughts of why given some of the factors what drove some of the upside there, at least from our perspective.

Terry McGraw

Okay, well, first of all Fred on the CDL market. As we all know it is a very, very strong market and the pipeline going forward is also very, very strong; these are instruments of choice of institutional investors because they have so much flexibility. Obviously in getting the risk reward attributes that they want.

And we will continue to see strong growth that way. But the only way I can really answer that is to say that the pipeline is full and is very strong, on the asset-backed securities. We were a little surprised as well, because we've been looking at the traditional areas of auto loans, student loans, credit card receivables and the like. And even though there's some softness on the automobile side, we're seeing strength elsewhere.

And so, it was good to see the asset back strong and, again across the board when you break down all the categories. We're seeing considerable strength and I think that pretends well for the economic conditions here, and outside the United States overall; Bob do you have a number on Michael Meltz's question?

Bob Bahash

I don't have that right now. But if we get it to really close or -- but otherwise we'll post it on the site.

Terry McGraw

You'll post it on the site, okay great. Okay, Fred.

Fred Searby - J.P. Morgan

No. I appreciate it but on the market share question, CMBS, I'm just...

Vicky Tillman

Maybe I can respond to that I said earlier that, we saw some of the changes occurring and implemented and adjusted, our assumptions around the criteria for CMBS. We believe earlier in the year, than what Moody's did, so that had to be taken into affect. My understanding is as well, is that Moody's did in fact change their criteria in April. But did not have, was not effective until July.

So, basically speaking how they managed that is up to them. But we saw it our criteria was in effect we saw it. We let the market know about it. And we, once we understood the conditions that were weakening, and that's in some of the structuring of the deals and the underwriting and the high leverage; once we saw that we put it into affect immediately, and that may explain the market share difference.

Fred Searby - J.P. Morgan

And was the principal beneficiary then Fitch.

Vicky Tillman

I don't know the answer to that.

Fred Searby - J.P. Morgan

Okay, thank you.

Terry McGraw

Thanks, Fred. Fred while we've got you. I think we have the Michael Meltz question here.

Bob Bahash

Yeah, for the month of June, the weighted average shares outstanding on a diluted basis was 349.5 million shares.

Fred Searby - J.P. Morgan

Okay.

Operator

Thank you. That does conclude this morning's call, on behalf of the McGraw-Hill Companies; we thank you for participating. And wish you a good day.

Terry McGraw

Thank you.

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