Good morning, and welcome to The McGraw-Hill Companies' Conference Call. [Operator Instructions] To access the webcast and slides, go to www.mcgraw-hill.com and click on the link for the first quarter earnings webcast. [Operator Instructions] I would now like to introduce Mr. Chip Merritt, Vice President of Investor Relations for The McGraw-Hill Companies. Sir, you may begin. Robert S. Merritt: Good morning, and thank you for joining us this morning at The McGraw-Hill Companies First Quarter 2012 Earnings Call. I'm Chip Merritt, Vice President of Investor Relations at The McGraw-Hill Companies. This morning, we issued a news release with our results. We hope you've all had a chance to review the release. If you need a copy of the release and financial schedules, they can be downloaded at www.mcgraw-hill.com. Once again, www.mcgraw-hill.com. In today's earnings release and during the conference call, we are providing adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the corporation's operating performance between periods and to view the corporation's business from the same perspective as management's. The earnings release contains exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with U.S. GAAP. The results for the prior year quarter also reflect the reclassification of the Broadcasting Group as a discontinued operation. Before we begin, I need to provide certain cautionary remarks about forward-looking statements. Except for historical information, the matters discussed in the teleconference may contain forward-looking statements within the meaning of the Private Securities and Litigation Reform Act of 1995, including projections, estimates and descriptions of future events. Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. In this regard, we direct listeners to the cautionary statements contained in our Form 10-Ks, 10-Qs and other periodic reports filed with the U.S. Securities and Exchange Commission. We're aware that we do have some media representatives with us on the call. However, this call is intended for investors and we would ask that questions from the media be directed to Patti Rockenwagner in our New York office at (212) 512-3533 subsequent to this call. Now I would like to turn the call over to Harold McGraw III, Chairman, President and CEO of The McGraw-Hill Companies. Terry?

Okay, thank you, Chip, and good morning, everyone, and welcome to today's conference call. You just heard, once again, from Chip Merritt. He's our new Vice President of Investor Relations. Chip joined us about a month ago, and we certainly are glad to have him aboard. For the last 73 quarters, Don Rubin introduced our earnings conference calls. On February 20, 2012, our Senior Vice President for Investor Relations, Don Rubin, passed away after only recently announcing his retirement from McGraw-Hill. His distinguished career was 52 years long. He was a manager, a thought leader, a mentor and a beloved friend to all, and his legacy has been one of growth, purpose, passion, trust and relevance. I had the distinct honor of working closely with Don for many, many of those years. With Don's passing, McGraw-Hill has lost a leader, and personally, we have lost a very close and dear friend. And I know this is true for many of you on the earnings call today. Don began his career as a sports writer and was a journalist at heart. And to honor Don's rich legacy at McGraw-Hill, the corporation has established a scholarship at the CUNY Graduate School of Journalism, and I can think of no better way to say goodbye to our dear friend than to say hello to future Rubin scholars in the lifetime ahead. All right, joining me on today's conference call is Jack Callahan, our Chief Financial Officer. This morning, Jack and I will review first quarter results, provide an update on our Growth and Value Plan progress and give the outlook for the balance of the year. There are a couple of themes that permeate today's discussion and are at the core of our focus here at the company. Obviously, number one is delivering top and bottom line growth; and the other is executing upon our Growth and Value Plan. These are at the forefront of our strategy to transform McGraw-Hill into 2 powerful new companies, and we're pleased with the progress made thus far in 2012. We see incredible opportunity ahead as we create McGraw-Hill Financial and McGraw-Hill Education. Both companies share a common promise and a common purpose. We're about helping our customers find new ways to succeed and to prosper in a rapidly changing world where information is often conflicting, confounding and sometimes confusing. The bottom line is that we help make sense of it all. To be clear, our mission is never, nor never will be, about us. It will always be about our customers, and if we remain focused on them, solid business results will follow. Therefore, we are very pleased to begin the year with a record first quarter. $1.3 billion is a record for the first quarter revenue and $0.51 is a record for first quarter adjusted diluted earnings per share. What makes these results all the more impressive is that they occurred during the quarter in which so many of our employees were focused on the work streams necessary for the separation of the company. As you will see momentarily, the 3 segments that will comprise McGraw-Hill Financial delivered strong top line growth. This performance, coupled with success of cost reduction efforts associated with our restructuring and the recent substantial share repurchases, led to record first quarter profitability. What is also notable is that on a pro forma basis, McGraw-Hill Financial and McGraw-Hill Education both delivered increased year-over-year adjusted operating profits. Steady progress has been made on the Growth and Value Plan during the first quarter. We remain on track for separation into the 2 industry-leading companies by year end. We have filed a request with the Internal Revenue Service for a ruling that the spin-off of McGraw-Hill Education is tax-free to the corporation and its shareholders. And I'm very pleased to inform you that as of late last night, we have received a favorable ruling from the IRS agreeing to the tax-free status for the spin-off of McGraw-Hill Education. The corporation also plans to file the Form 10 in the coming weeks. We remain on track to deliver in excess of $100 million on a run rate basis and cost savings by year end. These cost savings are also seen across the corporation with first quarter expense growth on an adjusted basis of only 3%, which expanded the consolidated margin by approximately 200 basis points. Implementation is well underway on the Growth and Value Plan. Globally, there are more than 100 people supporting more than 15 work streams to drive separation and to reduce costs, and we will continue to invest in McGraw-Hill Financial through targeted acquisitions. So far this year, we have acquired 2 companies, both adding capability to S&P Capital IQ's platform. The first was R2 Financial Technologies. With this addition, S&P Capital IQ will now be able to offer clients an integrated view of market and credit risk across asset classes in a unique solution. This is increasingly important for financial institutions that are looking to manage complex and diverse portfolios across the globe. By combining R2, clarify and risk solutions development teams, we have the foundation to build a powerful and innovative new offering for professional investors. The second acquisition was QuantHouse. QuantHouse provides S&P Capital IQ clients with a global integrated low-latency distribution network. They will develop a new generation of desktop monitoring and display applications, alpha generation tools and integrated low-latency data feeds, moving S&P Capital IQ closer to becoming a one-stop shop for all financial industry professionals. With that, let me now turn to the business results. McGraw-Hill Financial, on a pro forma basis, delivered a very solid quarter with revenue up 8% and operating profit up 10%. While all 3 segments delivered revenue growth, it was clearly Commodities & Commercial that led the operating profit growth. McGraw-Hill Financial derives 40% of its revenues from outside the United States. And during this first quarter, the international business growth of 12% outpaced domestic growth of 5%. The Standard & Poor's Ratings segment led the way as the most influential on the international side, with 47% of its first quarter revenue from sales outside of the United States. S&P Ratings is the largest business segment within McGraw-Hill Financial. Revenue for this segment grew 5%, driven predominantly by transaction revenue, which increased 10%. The key drivers to the increase in transaction revenue were: one, the U.S. public finance issuance, which increased 61%. But recall now that the muni market was adversely impacted back in the first quarter of 2011 by weak municipal economies and the perceived risk of a wave of muni defaults, which did not come to fruition. Secondly is the U.S. corporate issuance increased 8%, driven by record speculative-grade issuance, which increased 14%. During the quarter, risk aversion waned due to the European Central Bank liquidity. But in the global capital markets and a temporary resolution of the European sovereign situation, this resulted in a quest for yield by investors and European nonfinancial corporate issuance, which increased 31%. Non-transaction revenue, which represents 58% of first quarter revenue, increased by 2%. The macro themes that we have shared with you in the past relating to the ratings market remain in place, namely: a large pipeline of maturing global corporate debt that will need to be refinanced. Another would be the shift in Europe from bank loans to the public debt markets. In fact, during the first quarter, European companies borrowed more from the bond market than they did from banks. This trend was highlighted in a Wall Street Journal article written earlier this month entitled, Bonds With Banks Fraying. European Companies' Move Into Debt Markets Bucks Direct-Lending Tradition. And finally, the structured finance market recovery remains beholden to improved activity in the residential and commercial real estate markets. Operating profit was down slightly in the quarter as we made targeted investments in new employees to reinforce growth of corporate and government ratings, as well as growth in emerging markets. In addition, legal expenses were up versus a year ago, but were more modestly down on a sequential basis versus the fourth quarter of 2011. While certainly expensive, our success on the litigation front has been encouraging. Three additional cases were dismissed in the first quarter, bringing the total to date to 27. Seven dismissals by the lower courts have been affirmed by higher courts and 10 cases have been voluntarily withdrawn. One very important case was the Reese case. Earlier this month, the judge granted our motion to dismiss all claims against the corporation. This was important because it was 1 of 4 purported class actions stock drop cases filed against the corporation associated with the financial crisis, and now all 4 have been dismissed. The Ratings business remains an area of focus for regulators. While I recognize that the suggested regulations in Europe continue to evolve, I'm increasingly encouraged by some of the more pragmatic views that have been expressed more recently. All in all, I'm encouraged by Ratings' start to the year. I believe that we are investing appropriately in the business to enable continued growth. And as the credit markets continue to normalize, we are well positioned for success. Let me now turn to S&P Capital IQ/S&P Indices, the second-largest segment within McGraw-Hill Financial. It delivered top -- solid top and bottom line results with revenue and operating profit increasing 9% and 11%, respectively. Both S&P Capital IQ and S&P Indices delivered year-over-year revenue growth with 75% of revenue coming from subscriptions, up from 74% a year ago. Looking at S&P Capital IQ alone, revenue increased 10% and a key driver of this growth was the 11% increase in Capital IQ clients year-over-year. However, both RatingsXpress and RatingsDirect also contributed to the double-digit revenue growth. This was in part due to the cross-selling opportunities that are being realized as both the Global Credit Portal and TheMarkets.com are migrating onto the Capital IQ platform. Another driver of subscriber growth is the continuous enhancements to the platform. A few examples include the iPhone and BlackBerry apps that are now available and an enterprise solutions software development kit that was launched in January that will allow our clients, IT personnel to pull just the data they need when they need it. With the acquisitions of R2 and QuantHouse, along with internal capabilities, S&P Capital IQ is well poised now to deliver further competitive capabilities to offer our clients the most comprehensive market data and risk analytics platform in the industry. S&P Indices revenue increased 5%. The key contributor to this was an 11% increase in assets under management in exchange-traded funds linked to S&P Indices. During the quarter, 10 brand new indices and 23 variants to existing indices were launched. Also, during the quarter, 41 new exchange-traded funds linked to S&P Indices were launched, bringing the total to 419 ETFs. These new additions bode well for the continued growth of S&P Indices. Another area of excitement within S&P Indices is the pending joint venture with the CME Group. We continue to anticipate completing this transaction by midyear. Clearly, the highlight of the quarter was the performance of the Commodities & Commercial segment. While the smallest segment within McGraw-Hill Financial, it delivered year-over-year operating profit gains that led all the other segments. Revenue growth was 13% with international revenue up 23%. Not only was there strong top line growth, but the expense control was outstanding, resulting in impressive segment operating profit margin expanding to over 27%. Within Commodities, subscriptions for petroleum and national -- natural gas products drove the 22% increase in revenue. Since the acquisition of BENTEK Energy, we have been leveraging our Platts sales force to drive increases in our natural gas business. Because of the growth in our Commodities business, I thought it would be instructive to spend a few minutes discussing our hidden gem, Platts. Platts is a leading provider of oil, natural gas, electric power, coal, shipping, petrochemicals and metals information. Importantly, more than 90% of revenue is derived from subscriptions. That results in a business with very little volatility. Market Data is Platts' largest product. It is a subscription service that provides access to the latest price data, including end-of-day assessments, third-party data and access to a complete historical database. Platts' price data is highly valuable to traders, risk managers, analysts and others who seek unbiased price assessments. Because of the importance that the market participants place on Platts' price assessments, they are frequently utilized as reference points in long-term contracts between 2 parties. As such, Platts has become integral to the functioning of the industries in which it serves. We believe that Platts can continue to deliver meaningful growth by focusing on extending capabilities within markets it already serves and expanding into new market areas. With Commercial, J.D. Power delivered significant year-over-year revenue growth. While all industry sectors delivered growth, automotive led the way both domestically and internationally. With that, let me move over to McGraw-Hill Education. McGraw-Hill Education reported a 2% decline in revenue, yet delivered a 13% increase in segment operating profit. By now, everyone is very familiar with the weakness in the el-hi market. In contrast, both Higher Education and Professional delivered nice revenue growth. Also, quite encouraging were the cost reductions that the segment delivered, most notably as a result of the restructuring actions taken in the fourth quarter of 2011. We want to ensure that our cost structure is optimal for the new market realities and that we make the appropriate investments in the digital products that our customers demand. Because the first quarter is such a seasonally light quarter, I'm not going to get into detailed discussions regarding adoption in open territory progress, but we'll be doing that as we go forward. Instead, I'd like to focus on digital progress. As I've said before, I believe that the digitization of education represents the opportunity of the century. As McGraw-Hill Education is formally launched later this year as an independent company, it will be one of the market's commanding leaders with a brand name that's already universally recognized and respected for past accomplishments. We are targeting new achievements in a changing educational landscape that's limited only by our imagination. Currently, Professional and Higher Education are leading our efforts in delivering digital solutions to address customer needs in the marketplace. Nearly 40% of Professional revenue came from digital products during the quarter. This shift is also happening in our larger Higher Education arena, which realized a roughly 50% increase in digital revenue year-over-year. Since digital products are often subscription-based, another way to measure the traction that these products are making to our product portfolio is to take a look at deferred revenue. Deferred revenue grew 63% compared to the end of the first quarter of 2011 to $106 million. This gain was largely driven by the sales of CINCH Science, an all-digital curriculum for the school market; and McGraw-Hill Connect, a homework management and study system for the higher education market. The Higher Education, Professional and International Group reported a 2% increase in revenue. We were excited to see a continuation of the recent strength in Higher Education and Professional with revenues up from the prior year by mid-single digits. These increases were partially offset by a decline in international results. The School Education Group reported a 10% decline in revenue from the prior year, with decrease occurring in both the instructional materials and testing businesses. The first quarter is the smallest in the el-hi market, representing approximately 11% of annual sales, and results are not predictive of full year trends. Those trends are being determined now as school districts across the country decide which materials they will order later in the year for use beginning next fall. So far, the spring selling season appears to be progressing well for McGraw-Hill and the industry in terms of district level activity. However, funding concerns remain acute in many areas. We will have a better view on the full year el-hi market at the end of the second quarter. We are setting up the Education business to thrive as a stand-alone company. We are putting in place the cost structure and digital capabilities necessary for McGraw-Hill Education to lead the transformation of the industry. And therefore, in summary, McGraw-Hill Companies is off to a record start to the year. McGraw-Hill Financial should continue to deliver solid growth. With bolt-on acquisitions and our in-house capabilities, we plan to continue to deliver increased capabilities to our customers. McGraw-Hill Education will focus on capitalizing on the opportunity of the century by driving unique, new digital product offerings to satisfy a changing educational landscape while simultaneously creating a cost structure that is rightsized to serve the market. The corporation will remain focused on delivering on our Growth and Value Plan and continue to work towards the completion of the spin-off of McGraw-Hill Education by year end. Okay. That completes our review of operations. I will now ask Jack Callahan, our Chief Financial Officer, to update you on some key financials. Jack? John F. Callahan: Thank you, Terry. Let me begin this morning by discussing our consolidated results. Terry has just discussed the record first quarter revenue that we delivered, which represented 6% growth versus 2011. The solid revenue performance was leveraged by limiting our adjusted expense growth to just 3%, essentially 1/2 of our revenue growth. As a result, we were able to realize adjusted operating profit growth of 18% and delivered a consolidated adjusted operating margin of 19%. This resulted in margin improvement of approximately 200 basis points versus last year. We are beginning to see the benefits from the multiple initiatives underway across the organization to improve expense productivity as we separate the company and prepare for the spin-off of Education. In addition, we were able to leverage this strong growth with substantial share repurchases. The result was to turn the 18% growth in adjusted operating profit into a 30% increase in adjusted diluted earnings per share. Our share repurchase program is an important part of the Growth and Value Plan. Since the beginning of 2011, the corporation has repurchased nearly 36 million shares at a weighted average price of $42.05. This is a reduction of approximately 12% of the shares outstanding at that time. Apart from the completion of the accelerated share repurchase program, no other shares were repurchased so far in 2012. As we get closer to separation and accumulate additional cash, we will consider when to resume share repurchases. We have a very strong balance sheet with cash and short-term investments of $932 million. Year-over-year, our adjusted free cash flow was down $44 million. The first quarter is the seasonally weakest cash flow quarter. This was exaggerated this year by the timing of some working capital and tax payment items. We fully expect to deliver another year of solid adjusted free cash flow growth, with guidance of approximately $750 million. Now let me provide some additional details around the execution of the Growth and Value Plan. During the quarter, we continued to make progress on our target of at least $100 million in run rate cost savings by the end of 2012. The margin expansion that we delivered in the first quarter was, in part, due to these efforts. We have already taken some actions that deliver cost saving, and as the year progresses, we plan to take more. Therefore, the cost savings from these initiatives should step up throughout the year. However, we are not solely focused on reducing costs. We continue to make targeted investments in the business to support global growth and enhanced capability. We do want to give you our current outlook with regard to the onetime costs in support of the separation and the cost reduction plan. Please keep in mind that these are estimates and timing has not been finalized. We will update you as we progress through the year. During the first quarter, we incurred $33 million of onetime Growth and Value Plan costs that we noted in this morning's press release. We anticipate that for the remainder of the year, we will incur an additional $100 million of onetime separation expenses necessary to implement the Growth and Value Plan. These onetime expenses are largely professional fees as we need to support the various consultants, business process and information technology firms and financial advisors. Please keep in mind this is the working estimate. In addition, we anticipate that during 2012, we will continue to incur restructuring costs as part of our ongoing cost reduction initiatives as we did during the fourth quarter of 2011. While the timing of these actions are still fluid, restructuring expense for 2012 could be approximately up to $75 million. As we prepare to file the Form 10 necessary for a tax-free spin of the Education business, I want to update you with some high-level thoughts with regards to the capital structure of the 2 new companies. We expect that McGraw-Hill Financial will carry a strong investment-grade rating and continue to be committed to a strong dividend. With McGraw-Hill Education, we are targeting a more flexible investment-grade rating and a modest dividend. We will ensure that at the time of the spin-off, that there is adequate liquidity to meet business needs and to manage the seasonal fluctuations in working capital. And as Terry mentioned, we have received a ruling from the Internal Revenue Service agreeing to the tax-free status for the spin-off of McGraw-Hill Education. All in all, we are off to a terrific start with a record first quarter. Our guidance remains unchanged, separation activities are accelerating, our cost reduction programs are on track and we are focused on the mission to establish 2 powerful industry leaders by year end. With that, now let me turn the call back over to Terry McGraw.

Okay, thanks, Jack. And Chip, do you have any start-off questions? Robert S. Merritt: Sure. So just some instructions here. [Operator Instructions] And now we're ready to take your first question. Operator?

[Operator Instructions] This question comes from William Bird with Lazard. William G. Bird: Just based on your pipeline of new issuance right now, do you think transaction-based issuance can grow in Q2 just given the big refi boom last May?

The answer to that is yes from what we're seeing at this point, both in terms of corporate's and government's continued activity on the public finance side and also some growth in the covered bonds. So yes, I think so. William G. Bird: And just as a follow-on, what do you expect prospectively for S&P expenses?

Well, again, for Q1, coming out of the fourth quarter, we had a couple of targeted expenses that were unusual to the quarter and it had a bit of an effect on it. We see that's moving out and being on a more normal run rate for the rest of the year, but we will see. We also had some onetime additional legal costs that were associated with that. And we see that's moving out as well. So we think that there was just a couple of targeted expense areas influencing us and that we'll be back to a more normal run rate. John F. Callahan: I'll just add, it was -- we were right around 40% margins in Q1. And I think on a full year basis, we would look to be sort of in that range or a tad better. William G. Bird: Great. Just one final question. On Commodities & Commercial, you had really tight expense management with very high revenues. I'm just wondering what you're expecting for the expense profile of that business going forward. John F. Callahan: The margin's is a spectacular start for that business, in the high 20s. I think we'd kind of on a full year basis, be pointing back, and from a margin point of view, more just sort of toward the mid-20s. As we sort through the year, there's going to be some timing of some investments as we go through the year, and the mix was quite good in Q1. So we're not -- we wouldn't project to maintain that margin for the full year at this time.

Yes, but we are very pleased with it and... John F. Callahan: Spectacular start.

And getting to the mid-20s is a good position for us.

Our next question comes from Craig Huber, Huber Research Partners.

I’m just curious on the share buyback, why did you stop, I guess, in the first quarter, the share buyback? It's on hold, it sounds like, until you're closer to the spin. That's my first question.

Yes. Well, look, we went through an accelerated program through 2011, completing 1.5 million shares -- $1.5 billion in terms of a buyback. And so coming into this year and seeing how the Growth and Value Plan was progressing, we just slowed that part down and we are dedicated to it, and we will get back to it. John F. Callahan: And just seasonally, I wouldn't use the word limited, but it is the low point in terms of domestic cash availability and we'll start to accumulate as we go through the year. And as we get closer to separation, we'll be back to evaluate that.

And then also, concerning the spin, is there any chance that you actually end up selling the Education division as opposed to spinning it off, or is that off the table at this stage?

Well, it's very important, Craig, that we have a very clear and established direction and the direction that we have taken is that of a spin. We were looking for the IRS' favorable ruling, which we've received. The Form 10 is ready to go. And in terms of standing up the business, a lot of progress is made. Now having said that, and consistently I've said that we will look at all aspects of this, the most important thing is obviously getting the most value we possibly can for the shareholders. And that's what we'll do. But our direction and -- to make sure that we're on progress and that the outcome is for 2012, we are on to the spin, but we will obviously look at all things. Craig A. Huber: And my other question here, please, Terry, it looks like each of the last 2 years your total costs are between $4.7 billion, $4.8 billion. You've talked about taking on a run rate in excess of $100 million. I mean, the fact that you're even in a ballpark of $100 million, is that really a light, conservative number in your mind, Terry, as you think out here? I mean are you feeling increasingly confident you could significantly exceed $100 million of cost savings, please?

Yes, Craig, as I've said before, it's important to put a benchmark down and we have said in excess of $100 million. Clearly, as we complete both the preparation and the execution for separation, there are going to be a lot of other opportunities to look at and some are clear and some are not yet. And so I think sticking with at least $100 million is the right thing to do, and we will keep informing you of changes to that. And I agree with you, I think that there is an upside to that number. John F. Callahan: And Bill, just to -- I think there's not too many companies out there that are working on both separation and cost reduction at the same time. And I fully anticipate each company, once they are separate as we go into 2013, will be detailing their own productivity plans going forward. Craig A. Huber: Lastly, if I could, Terry. I mean in the past, you'd given a preliminary outlook for your thoughts on the adoption market for the new year in open territories. What's your current thoughts? I know it's early in the year, but just what do you expect the overall market to be? Down, I assume, for adoption market in the open territory?

Yes, I think that it's going to be a difficult market for 2012 and this is coming off of several years of a difficult market. When you have as many states as we do that are in deficit and the funding comes from state and local municipality tax structures, it's putting an awful lot of pressure on the K-12 system and all that. And certainly, one of the things that, from a political agenda and hopefully from a business and government agenda, America has to start to think about infrastructure, education and 21st century skill sets and our investment in those areas if we're going to be successful in this knowledge economy. But clearly, the funding level is down significantly on the adoption side and the open territory side at best is going to be fragmented. Craig A. Huber: Can you maybe quantify those 2 thoughts, though, between the 2 markets? I mean you're thinking down 5% to 10% or it’ll be [indiscernible] worse than that?

From where we are right now? Craig A. Huber: Yes, but versus what happened last year.

Yes -- no, I think we're going to be down, and I would say your 5% to 10% range is probably right.

This question comes from Peter Appert from Piper Jaffray. Peter P. Appert: So, Jack, can you give us any specifics in terms of what you think the -- this is a follow-on to Mr. Bird's question earlier, what the run rate on S&P cost growth should look like for the balance of the year? John F. Callahan: Peter, we were -- in terms of -- all-in for the balance, I think sort of mid- to high-single digit in some of the expense growth rate. I think that we have some overlaps that may move around a little bit. But again, we're going to prudently manage any headcount adds depending on what's going on in the overall marketplace. I mean, right now, one of the challenges we're dealing with is, at least in certain segments, we have pretty fast growth right now and we have to be sure that we have the right capability to stay on. And I think all-in for the year, we'll be 40% or a bit better from a margin point of view and that's sort of the range we're seeing as we stand right now. Peter P. Appert: I guess the real question, Jack, is in the context of what's been pretty healthy issuance volume here, I guess I'm slightly surprised maybe I don't see more operating leverage in the business. So is 40% the new normal then in terms of where margins should be? Or do you think there's room for that number to move higher? John F. Callahan: I think there’s opportunity to move higher, I'm not sure I'd point to a big step up this year. Peter P. Appert: Not this year, I was thinking more in the context of secular growth in issuance over the next couple of years. John F. Callahan: I certainly believe there's an opportunity to start to leverage that and start to move forward. There are -- and it's not just the mix within S&P. I do think some of our broader cost initiatives, particularly once we get to a more focused operating company, McGraw-Hill Financial will provide the operation a few more opportunities to continue to get an improved expense productivity moving forward. Peter P. Appert: Got it. And then I'm wondering, so you've had considerable success on the legal side, obviously, with these 37, I guess, those cases dismissed or withdrawn. So when do we see the legal costs -- I'm sorry?

27. Peter P. Appert: 27 and then 10 more withdrawn, right?

Right. Peter P. Appert: So when do we see the legal costs actually start declining? And Terry, are you reasonably comfortable now that the -- I know you can never dismiss completely the legal risk, but maybe just your assessment of the legal risk given the success you've had so far?

Well, thanks, Peter. We've said all along with the types of suits that these represent, Standard & Poor's is clearly not a seller or distributor of securities. And so anything that would say or suggest that we do is just flat out wrong. And once we get our opportunity to explain that, that gets recognized. In terms of stock drop suits and things like that, again it just takes time to get through the system and we do everything at the federal level. And it takes about 2.5 years from when you get a suit before you get before a federal judge. So the time part is there. So I think the overall picture and the success that we said is in keeping with exactly what I said back about 1.5 years, a couple of years ago, which is that the risk is relatively low and it's bearing out. And you're right. Who knows and what comes around. And we will deal with everything as we go. But right now, the legal risk is low and we're very pleased with the reaction that we're getting in the system. John F. Callahan: And Peter, one thing I'd just add that just from the way the expense -- the overlaps went, we had a tough overlap in Q1. But I would note that legal expense on sequential basis was down a bit. So nothing's changed in Q1 that we didn't have with us in Q4. Peter P. Appert: Got it. And would those legal costs continue to move lower, do you think, sequentially, Jack? John F. Callahan: I wouldn't -- look, I think with the cases that are left, there's some run rate spend until, I think, some of these cases are resolved. So I wouldn't point to any immediate upside there, but... Peter P. Appert: Got it. And then one last thing. Now that you have the IRS approval, what needs to happen to get the deal done? Can you give us a little sort of the timetable benchmarks that we should be looking for?

Well, in terms of the spin, we are looking -- we said by the end of 2012 and we're looking a little quicker than that. Obviously, we've got to file the Form 10. We've got to work on standing up the business as an independent company, which means strengthening elements of the management team. And so as we do that from a timetable standpoint, we're looking at somewhere hopefully in the October and November standpoint.

This question comes from Michael Meltz from JPMC. Michael A. Meltz: First question is on guidance. Can you just perhaps just update us, you're -- you are reiterating the EPS guidance. Are you still sticking with what you said in February or the end of January on the segments or companies, McGraw-Hill Financial, I believe you said revenues and profits up 7% to 9% or up high singles and Education revenues and profits relatively flat? That's the first question. John F. Callahan: Yes -- no, I think we'd like or I think we’d be in pretty much in the same place today. I think we've done a few -- within McGraw-Hill Financial, some of the segments, McGraw-Hill -- S&P Capital IQ Index, it will be -- some of the acquisitions we're doing could be a tad dilutive to their run rate for the balance of the year. We're going to have -- we're having a lot of volatility on the Index side, so that can move around a little bit. But we're also, on the other hand, perhaps a bit more optimistic about the growth in Ratings than maybe we were back in January. So I think on balance, overall, the way I'd characterize McGraw-Hill Financial, we're still feeling pretty comfortable with the outlook for the year.

And also, for the guidance, Michael, for the entire company, with the $3.25, $3.35 EPS, we're right on that. Michael A. Meltz: Okay. And then, Jack, I appreciate the commentary on the leverage profile of the 2 companies. I don't know what the S&P vernacular is, but can you -- what does strong investment grade and flexible investment grade, what does that mean in terms of actual leverage numbers? Debt-to-EBITDA, how should we think about that? John F. Callahan: Well, I mean, in terms of McGraw-Hill Financial -- in terms of McGraw-Hill Education because that's really where they were seeing obviously a change in terms of a rating, probably BBB- would be a potential way to think about it. And then effectively no change for McGraw-Hill Financial relative to maybe better over time.

Yes, maybe better. Michael A. Meltz: Okay, and then just the last question for me. The comment on the timing or just the separation charges is -- so the aggregate cost of this program, as you see it, is you said $133 million or so this year, I think, and then what was it last year? John F. Callahan: Last year, it was $10 million. We called that out specifically in Q4. And so that's when we started to incur -- let me give you a sense of what's in those numbers. Part of it is there's just work that has to be done here so -- just to get the Form 10 ready, we had gotten some help from -- in the IRS. We've gotten some help from some of the accounting consulting firms. We have some process consultants in helping us manage the various work streams that we have going across the company. For a while, we're going to outsource certain activities, most likely going to outsource certain activities that we're going to have -- we're going to have to start paying those vendors before we start to realize the cost saves. So effectively, for a couple of months, we're going to have double costs. It's just trying to give you some sense of that onetime cost of driving the separations. So those are just some examples of what's in there. Michael A. Meltz: Okay, and then my final question related to that. You had -- I think on the last call, you said you'd likely get the Form 10 out in the first part of April and now you're saying the coming weeks. And I think, Terry, you just said spin timing October and November. Has there been any delay in your process? I just want to make sure we fully understand the timing of everything here.

No, no. We just want to make sure that in terms of making sure that we have the most complete information in the Form 10, we're looking at a number of issues in terms of both management organization and some of the shared costs, and so we're essentially ready to go and I think you'll see something very soon.

This question comes from Doug Arthur from Evercore. Douglas M. Arthur: Just going back to the Ratings business, when you read the press release on kind of the drivers of the business in Q1, U.S. looks very strong, Europe had some issues particularly in the financials. Yet when you get to the bottom of the paragraph, it says international grew faster than domestic. So I'm trying to understand, is that a mix issue? Did it relate to non-transaction revenues? I mean can you sort of break that down a little bit more fully?

Yes, what we were saying that McGraw-Hill Financial now, that's all 3 segments, derives about 40% of its revenues from outside the United States and that was growing at 12% versus domestic growth of about 5%. And clearly, the contribution was coming not only from S&P Ratings, but also S&P Capital IQ, Indices and Platts on that side as well. Douglas M. Arthur: Okay, yes, I was just referring specifically to the Ratings business. But I mean, it just looks like your mix was much more favorable U.S. versus international, but international revenues outpaced U.S. So I was just trying to understand that. John F. Callahan: One comment on the U.S. is that while obviously the bond market was very active in Q1, the bank loan market was actually down considerably versus year ago. So there was a bit of a mix impact in the U.S. But again, the bond market in the U.S. was fantastic. And also, too, the international side, I think continues to benefit a little bit more on the non-transaction side with the continued growth in the broad product lines that we have within our CRISIL business and some of our other international businesses.

This question comes from David Reynolds from Piper Jaffray.

It's Jefferies actually. Just want to ask about the Ratings business. I noted you mentioned some growth in costs in the emerging markets side of that business and I just wonder if you could talk to the emerging markets opportunity where you see it impacting your business across the piece and perhaps if you've got a feel for the relative growth prospects coming from emerging markets.

Yes, David, it's a great question because that's exactly what we're seeing, is tremendous emerging market activity. As we see more local bond markets cropping up, whether it be Tel Aviv or Johannesburg or Jakarta or any of these places, they are all trying to develop the capability of being able to establish more robust capital markets. And increasingly, for us, besides the more developed countries, a lot of activity is going to develop partnerships and developing stronger relationships in those markets. A great example of that is in India, is the whole CRISIL operation, which is doing exceptionally well and growing at a fabulous rate. But also because of the fact that with infrastructure financing and so forth, in India alone, over the next 5 years, they're going to need $1 trillion of infrastructure financing. So that's where some of that kind of growth is coming from. So again, especially driven off of infrastructure, the emerging markets represent an increasingly very important opportunity for us.

We will now take our final question from Edward Atorino from Benchmark. Edward J. Atorino: You gave digital as a percent of Professional. What's Professional as a percent of Education? John F. Callahan: Ed, it's Jack. Professional's actually -- it's certainly not one of our bigger segments, but the interesting thing about Professional is that it's the place where we've seen the shift to digital in the marketplace in that segment faster, the fastest, so in some ways it's sort of, if you use the analogy the tip of the spear, as we start to demonstrate that capability. But I would tell you that if you were then to say, okay, which large segment is becoming most like Professional, we would say right after that's probably our Higher Ed business in the U.S. It's not as digital as yet. It's maybe about half this penetration that we're seeing in Professional, but we're starting to see accelerated growth in that area. So I think what you're going to see is the change not so much in terms of our ability to sell, but the readiness of customers to accept and want and demand digital products. Edward J. Atorino: What's the state of digital at the schools?

That's a good one. It's clearly fragmented and clearly growing. One of the things that we launched last year that's doing very well is with our relationship with Apple, 5 titles on the iPad, and that was aimed at high schools. Other programs like the CINCH Math and CINCH Science and things like that are also doing very well. But there has to be a funding receptivity in that. And what we're really seeing is replacement where some of these programs are replacing more traditional product. Jack mentioned the Higher Ed area as well. By the way, just in terms of the Apple relationship, Ed, we've got 50 programs on the iPad in the Professional area now. This having to do with science, engineering, medical, in these areas. Fabulous programs. And we have 70 titles at the Higher Ed side on the iPad now and it's getting increasing receptivity in going in that direction. But for Higher Education, as you know, our big programs have been McGraw-Hill Connect, McGraw-Hill Campus, McGraw-Hill Create. These have all been direct solutions to specific, either home study or homework helping or actually curriculum-support initiatives. So I mean you can extrapolate it out, but the digital component of this is just growing ever so quickly, and the capability that we have gratifies us on this. Now we got to get some help in the markets, especially in K-12, on that part. But where we can see people replacing product, traditional product, you're going to start to see even more receptivity. Edward J. Atorino: I was going to ask about that. What is the receptivity at the schools? Are the teachers happy? The parents? I know instances where schools are using a lot of digital at the local levels.

It depends on -- it obviously depends on the school and all of that. But clearly, parent receptivity is high. Teacher training becomes a bit of an issue and one of the things that we have to be able to do is to help support that whole function. But certainly, there's no pushback on it. It's really, from a district standpoint, much more of a funding of the replacement. Robert S. Merritt: That wraps up today's conference call. We appreciate your attendance and look forward to speaking to you in the future.

Thank you. That concludes this morning's call. A PDF version of the presenter's slides is available now for downloading from www.mcgraw-hill.com. A replay of this call, including the Q&A session, will be available in about 2 hours. The replay will be maintained on McGraw-Hill's website for 12 months from today and for one month from today by telephone. On behalf of The McGraw-Hill Companies, we thank you for participating, and wish you a good day.