Wednesday, July 26, 2006

McGraw Hill Reports Second Quarter; Scholastic FY 2006

McGraw Hill:
McGraw Hill reported their second quarter results and they are quite good. They have now had two strong quarters this FY and as a result they have improved thier guidence for the full year EPS. Terry McGraw:

"Our new EPS guidance for 2006 is $2.44 to $2.49, and again that also excludes
the incremental impact of all stock-based compensation. To be clear, that
excludes $0.13 per incremental stock-based compensation this year and $0.04 for
the one-time charge for the elimination of the restoration stock option program,
which was already announced in the first quarter. With more robust opportunities taking shape next year, we expect to return to double-digit earnings growth in 2007."

This is a transcript of the call from Later in the call they discuss the education unit which they indicate has later adoptions this year but which they must believe will be stronger than budget. During their second half is education represents a larger percentage of total revenue, but margins are lower than their information business. The information businesses appear to be driving their first half growth.

Scholastic FY 2006: Revenue up 10% versus 2005.
Scholastic reported their full year last week and the 2006 results retained some revenue from Harry Potter but not for the entire year. Here is their corporate presentation. In the presentation, management spoke of a challenging year and in looking forward spoke about an expense reduction plan designed to hold operating margins and EPS. Revenues for FY 2007 are forecasted to be flat ($2.3bill versus $2.1Bill and EPS lower (1.66 versus a range of $1.55 - $1.85). Management of the Scholastic balance sheets is a significant positive story for the year. They have $300mill in debt maturing in 2007 but multiple options to fund or refinance this debt.

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