U.S. Markets closed

McGraw-Hill swings to a loss on big charge in 4Q

Daniel Wagner, AP Business Writer

FILE - In this Tuesday, Feb. 5, 2013 file photo, a screen at the trading post for The McGraw-Hill Companies shows its stock price, on the floor of the New York Stock Exchange, in New York. McGraw-Hill reports earnings, Tuesday, Feb. 12, 2013. (AP Photo/Richard Drew, File)

WASHINGTON (AP) -- The McGraw-Hill Cos. swung to a loss in the fourth quarter as its transition to a financial information provider forced it to take a big, one-time charge.

Without the charge, the company's net income rose but fell short of Wall Street's forecasts. Its shares slipped in premarket trading.

The results come a week after the U.S. government filed civil charges alleging that Standard & Poor's, McGraw-Hill's credit rating division, fueled the financial crisis by giving high ratings to risky investments. The government may seek up to $5 billion — several years' worth of net income for McGraw-Hill.

The company reiterated that the lawsuit is without merit and relies on incomplete evidence.

The financial information company, based in New York, said Tuesday that it lost $216 million, or 78 cents per share, in the three months ended Dec. 31. That compares with net income of $214 million, or 75 cents per share a year earlier.

The loss was driven by a $404 million charge McGraw-Hill took on the pending sale of its McGraw-Hill Education division to Apollo Global Management, a private equity investment firm. McGraw-Hill said in November that it will sell the textbook and e-learning publisher for $2.5 billion in cash and debt. As part of the deal, McGraw-Hill will be renamed McGraw Hill Financial.

The charge, which had been announced previously, was related to inventory, previous investments and goodwill in the textbook publishing group. Excluding the charge, the company's income from continuing operations was $190 million, or 67 cents per share, compared with $108 million, or 38 cents per share in the same period of 2012.

Analysts surveyed by FactSet had expected adjusted earnings of 69 cents per share.

Revenue from continuing operations rose 22 percent, to $1.23 billion from $1 billion a year earlier. Both figures exclude revenue generated by the education division that is being spun off, a company spokeswoman said. Total revenue in the quarter was $1.68 billion, she said.

Analysts had expected revenue of $1.53 billion. The McGraw-Hill spokeswoman said the estimates were based on total revenue, including the education division. On that basis, revenue in the quarter was 10 percent above Wall Street forecasts.

For the full year 2012, McGraw-Hill earned net income of $437 million on revenue of $4.45 billion.

The company introduced 2013 revenue guidance of "high single-digit growth," suggesting that revenue next year could fall between $4.76 billion and $4.85 billion. It expects adjusted earnings per share next year of $3.10 to $3.20.

Analysts were expecting net income in 2013 of $3.57 per share on revenue of $5.96 billion.

McGraw-Hill shares fell 78 cents, or 1.8 percent, to $43.50 in premarket trading almost an hour before the opening bell.


Daniel Wagner can be reached at www.twitter.com/wagnerreports .