Fitch Affirms `A+' Rating For McGraw-Hill.Business Editors & Analysts CHICAGO--(BUSINESS WIRE)--July 27, 2001 Fitch has affirmed the `A+' senior debt rating and the `F1' commercial paper and extendible commercial notes ratings of The McGraw-Hill Companies, Inc. The ratings reflect the strong market positions and cash flow characteristics of McGraw-Hill's key business units. While leverage has increased as a result of recent acquisitions, including the $672 million Tribune Education acquisition completed in September 2000, primary quantitative credit measures have remained consistent with the `A+' senior debt rating, with double-digit EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become coverage of interest, strong cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses relative to total debt and excess free cash flow after capital expenditures, prepublication pre·pub·li·ca·tion adj. Of or relating to the time just before a publication date, especially of a book: The marketing department was amazed by the number of prepublication orders. costs and dividends. Financial policies have historically been conservative, although the company relies exclusively on commercial paper as its primary financing vehicle. McGraw-Hill's earnings stability is enhanced by the good diversity of business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets . While earnings for advertising-related businesses, including Business Week and the television stations, have followed the current cyclical downturn, this is being more than offset by strength in other businesses. Educational publishing is benefiting from the favorable adoption cycle and S&P Ratings is experiencing strong refinancing Refinancing An extension and/or increase in amount of existing debt. volume and growth in domestic and international markets. These factors, along with contributions from acquired businesses, are expected to produce double-digit growth in EBITDA in 2001. Concerns in the rating focus on the increased pace of acquisitions, which has raised overall debt levels, combined with the company's share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program. The company has used its debt capacity to acquire several businesses in recent quarters and continues to evaluate opportunities to strengthen existing businesses. The company also maintains an ongoing share repurchase program designed to offset earnings-per-share dilution from the exercise of stock options and to modestly reduce share count. Targeted repurchases Targeted repurchase Buying back of a firm's stock from a potential acquirer, usually at a substantial premium, to forestall a takeover attempt. Related: Greenmail. of 3.0 to 3.5 million shares in 2001 are expected to cost in excess of $200 million. As a consequence, the ratio of debt-to-EBITDA is expected to operate in a range of 1.0 to 1.5 times (x) over the near term as compared with approximately 1.0x in recent years. |
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