Reorg Hits MHE Earnings

by Jim Milliot, PW Daily -- Publishers Weekly, 10/19/2006

McGraw-Hill Education took a $5.6 million charge in the third quarter to cover severance costs associated with the integration of its el-hi basal publishing operations. The consolidation, which created the School Solutions Group (PW Foreword, Oct. 2), involved the elimination of some 400 jobs across the entire business segment. The restructuring charge contributed to the 7% decline in operating profit for MHE in the quarter, to $354 million. Sales were down 6.3%, to $1.07 billion.

Revenue in the school education group fell 12% in the quarter, to $603 million, as the school division had fewer adoption opportunities in the last quarter compared to 2005. The company’s elementary school products also had disappointing performances in Florida and California, and the testing market continued to be soft.

Sales in the higher education, professional and international group rose 2.2% in the quarter, to $467.2 million. Sales to colleges were led by the science, engineering and math segments, while sales in the humanities, social sciences and business and economic categories fell modestly. Overseas gains were driven by increases in Spanish-language markets and by higher college sales in Canada.

For the first nine months of the year, operating profit at MHE was off 13.1%, to $324.7 million, and revenue dropped 4%, to just under $2 billion.