- International revenue for S&P Credit Market Services, driven by favorable foreign exchange, grew by 5.8% to $204.5 million. International accounted for 47.9% of this group''s total revenue versus 35.5% for the first quarter last year.
- U.S. revenue for Credit Market Services declined by 36.6%.

Revenue from non-transaction sources-surveillance fees, annual contracts and subscriptions-grew by 11.2% to $309.1 million and represented 72.3% of Credit Market Services'' first quarter revenue.

The 55.8% decline in transaction revenue for Credit Market Services reflects the first quarter plunge in new issue dollar volume in the U.S. and European bond markets.

- In the U.S., total new issue dollar volume declined by 55.5% versus the same period last year, according to reports from Thomson Financial and Harrison Scott Publications, and S&P estimates. In the U.S., corporate new issue dollar volume declined 37.1%. Public finance was off 24.7%.
- Mortgage-backed securities were off 94.2%. Asset-backed securities were up 42.1% with growth due to a single large placement made during the first quarter.
- Collateralized debt obligations fell by 91.1%.
- In Europe, new issue dollar volume declined 55.3% in the first quarter versus the same period last year.

Revenue from ratings and services not directly linked to new public debt issuance dropped by 25.7% to $108.6 million reflecting substantially lower volume in bank loan and derivative products ratings.

- Strong performances by index services and Capital IQ products were key to Standard & Poor''s Investment Services'' double-digit top-line growth. Capital IQ''s customer base grew by 24% to more than 2,300 in the first quarter versus the prior year.
- Assets under management in exchange-traded funds based on S&P indices increased 23.1% to $209.7 billion compared to the same period last year. In this period, 13 new exchange-traded funds that track S&P indices were launched. There are now 157 exchange-traded funds based on S&P indices. S&P receives payments based on assets under management.
- The average daily volume of major exchange-traded derivatives based on S&P indices grew by 61% to 3.5 million contracts. The increase was primarily driven by E-mini, S&P 500 options and Volatility Index contracts. S&P is paid a royalty each time a contract is traded.

Information & Media revenue increased 3.2% to $243.4 million compared to the same period last year.

- Operating profit grew by 18.6% to $11.7 million.
- Foreign exchange rates did not have a material effect on revenue and operating profit growth.

Revenue increased 3.5% to $219.7 million for the Business-to-Business Group, which includes the following brands: Aviation Week, BusinessWeek, J.D. Power and Associates, McGraw-Hill Construction and Platts. Strong demand in the energy markets for Platts'' news and pricing services and growth in the Asia-Pacific region for J.D. Powers'' research services were the key drivers in the Business-to-Business Group''s first quarter performance.

- Advertising pages in BusinessWeek''s global edition were off 19.4%, according to the Publishers Information Bureau.
- Revenue of $23.7 million for the Broadcasting Group was essentially flat compared to last year as local and political advertising offset softness in national time sales.

Fiscal 2008 Outlook

- If the steep drop the company experienced in the first quarter in structured finance continues for the rest of the year, revenue at the Financial Services segment would decline 7% to 9%. The company would also expect a 500 to 600 basis point contraction in the operating margin.
- The company expects revenue growth of 6% to 8% at McGraw-Hill Education and Information & Media.
- The company anticipates operating profit improvement in the low single-digit range at McGraw-Hill Education, but stepped up investments in technology to accelerate the digital transformation of this business could lead to a 50 to 100 basis point decline this year in the segment''s operating margin.

- The company expects the operating margin to improve in 2008 at Information & Media Services.
- If current trends in financial markets continue for the balance of the year, the company would expect earnings per share in the $2.65 to $2.75 range for 2008.

Key questions from the first quarter earnings call conducted by The McGraw-Hill Companies, Inc. on April 29, 2008.

Peter Appert (Goldman Sachs): The investment services unit with 18% revenue gain was impressive in the context of the market backdrop. What is driving that and how important pricing is to that gain?

Terry McGraw: We have been increasingly building on that. The index services side has been strong. The overall portfolio services and the equity research side have also showed significant gains. The third part is Capital IQ, not only are we gaining on customer penetration, you are also starting to see because of all of the product enhancements and things like the charting functionality and things like that, that we think that that is going to lead to even more revenue enhancement there.

Peter Appert (Goldman Sachs): You made an indication of potentially more staffing cuts. Is that an indication that the second quarter in particular is off to a relatively soft start or pace of business has gotten worse?

Terry McGraw: When you have a significant revenue shortfall as we do in the structured finance area, until we start seeing any meaningful pickup in activity, we are going to be strict on those expenses. As we have said from the beginning, we are going to do it in staged phases. We did the first phase when we first started getting faced with some of these issues in the fourth quarter of last year. We did another phase in the beginning of this year and what we are examining and what we are looking at now is another phase of activity. I do believe that in the structured finance area we are seeing low volumes in the first quarter. If we start to see increased activity on this one, the second half is going to be a different picture, much more positive picture to us and position us better for 2009. At this point we will continue to be strict on cost and you will be seeing more activity associated with that.

Peter Appert (Goldman Sachs): How about on the education side, specifically you indicated some more cuts there?

Terry McGraw: There for the most part is the emphasis on the digital transformation. We are shifting from some of the legacy products to some of the educational services and some of the digital product enhancements. We are starting to see more market demand and therefore we are responding to that. Part of it, where we are in terms of some of the pre-pub costs, we have been able to cut back on some of those pre-pub costs at the same time we are increasing investment on the digital side and we are pleased by that. We want to see more progress in terms of that transformation.