0000064040 2008-01-01 2008-12-31 0000064040 2007-12-31 0000064040 2009-04-01 2009-06-30 0000064040 2008-04-01 2008-06-30 0000064040 2008-01-01 2008-06-30 0000064040 2009-06-30 0000064040 2008-12-31 0000064040 2008-06-30 0000064040 2009-07-17 0000064040 2009-01-01 2009-06-30 iso4217:USD xbrli:shares xbrli:shares iso4217:USD

<html> <head></head> <body>   <div style="font-family: 'Times New Roman',Times,serif"> <div align="left"> </div> <div align="center" style="font-size: 10pt; margin-top: 0pt"><u><b></b></u> <u><b></b></u> </div> <div style="margin-top: 0pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left">1.</td> <td width="1%"> </td> <td><b>Basis of Presentation</b></td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The financial information in this report has not been audited, but in the opinion of management all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly such information have been included. The operating results for the three and six months ended June 30, 2009 and 2008 are not necessarily indicative of results to be expected for the full year due to the seasonal nature of some of the Company’s businesses. The financial statements included herein should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (the “Annual Report”).</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The Company’s critical accounting policies are disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the Company’s Annual Report for the year ended December 31, 2008. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to revenue recognition, allowance for doubtful accounts and sales returns, prepublication costs, valuation of inventories, valuation of long-lived assets, goodwill and other intangible assets, pension plans, income taxes, incentive compensation and stock-based compensation.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>Since the date of the Annual Report, there have been no material changes to the Company’s critical accounting policies.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>Effective January 1, 2009, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 160 “Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51,” (“SFAS No. 160”). SFAS No. 160 amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for any noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary should be reported as a component of equity in the consolidated financial statements and requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interests.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>Accordingly, $72,578, $70,535 and $74,320 as of June 30, 2009, December 31, 2008 and June 30, 2008, respectively, have been reclassified from other non-current liabilities to shareholders’ equity.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>In the second quarter of 2009, the Company adopted SFAS No. 165, “Subsequent Events” (“SFAS No. 165”). SFAS No. 165 sets forth general standards of accounting for and the disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Company has evaluated subsequent events through July 29, 2009, which represents the date the financial statements are issued. The initial adoption did not have an impact on its consolidated financial statements.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>Certain prior year amounts have been reclassified for comparability purposes.</td> </tr> </table> </div> <div style="margin-top: 12pt"> </div> </div> </body> </html>

<html> <head></head> <body>  <div style="font-family: 'Times New Roman',Times,serif"> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left">3.</td> <td width="1%"> </td> <td><b>Segment and Related Information</b></td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The Company has three reportable segments: McGraw-Hill Education, Financial Services and Information & Media.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The McGraw-Hill Education segment is one of the premier global educational publishers serving the elementary and high school (“el-hi”), college and university, professional, international and adult education markets. During the second quarter of 2009, the segment incurred a net pre-tax restructuring charge that reduced operating profit by $11.6 million. During the second quarter of 2008, the segment incurred a pre-tax restructuring charge that reduced operating profit by $8.5 million.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The Financial Services segment operates under the Standard & Poor’s brand. This segment provides services to investors, corporations, governments, financial institutions, investment managers and advisors globally. The segment and the markets it serves are impacted by interest rates, the state of global economies, credit quality and investor confidence. During the second quarter of 2009, the segment incurred a net pre-tax restructuring benefit that increased operating profit by $0.4 million. In addition, during the second quarter of 2009 the segment incurred a pre-tax loss resulting from the sale of Vista Research, Inc. in May 2009 that reduced operating profit by $13.8 million. During the second quarter of 2008, the segment incurred a pre-tax restructuring charge that reduced operating profit by $15.2 million.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The Information & Media segment includes business, professional and broadcast media, offering information, insight and analysis. During the second quarter of 2009, the segment incurred a net pre-tax restructuring charge that reduced operating profit by $4.0 million.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>Operating profit by segment is the primary basis for the chief operating decision maker of the Company, the Executive Committee, to evaluate the performance of each segment. A summary of operating results by segment for the periods ended June 30 is as follows:</td> </tr> </table> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>2008</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Operating</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Operating</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 0px solid #000000"><b>Three months</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Revenue</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Profit</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Revenue</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Profit</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">McGraw-Hill Education </div></td> <td> </td> <td align="right">$</td> <td align="right">555,189</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">21,008</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">670,846</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">70,276</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Financial Services </div></td> <td> </td> <td> </td> <td align="right">673,788</td> <td> </td> <td> </td> <td> </td> <td align="right">276,354</td> <td> </td> <td> </td> <td> </td> <td align="right">735,477</td> <td> </td> <td> </td> <td> </td> <td align="right">303,142</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Information & Media </div></td> <td> </td> <td> </td> <td align="right">236,203</td> <td> </td> <td> </td> <td> </td> <td align="right">14,422</td> <td> </td> <td> </td> <td> </td> <td align="right">266,902</td> <td> </td> <td> </td> <td> </td> <td align="right">24,799</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total operating segments </div></td> <td> </td> <td> </td> <td align="right">1,465,180</td> <td> </td> <td> </td> <td> </td> <td align="right">311,784</td> <td> </td> <td> </td> <td> </td> <td align="right">1,673,225</td> <td> </td> <td> </td> <td> </td> <td align="right">398,217</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">General corporate expense </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(29,306</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(33,536</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Interest expense — net </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(18,499</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(20,354</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total Company </div></td> <td> </td> <td align="right">$</td> <td align="right">1,465,180</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">263,979</td> <td nowrap="nowrap">*</td> <td> </td> <td align="right">$</td> <td align="right">1,673,225</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">344,327</td> <td nowrap="nowrap">*</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" nowrap="nowrap" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom"> <td colspan="17"> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">  </div> </div> *        Income before taxes on income</td> </tr>   <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>2008</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Operating</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Operating</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 0px solid #000000"><b>Six months</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Revenue</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Profit/(Loss)</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Revenue</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Profit/(Loss)</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">McGraw-Hill Education </div></td> <td> </td> <td align="right">$</td> <td align="right">867,817</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(55,588</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">1,001,002</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(20,586</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Financial Services </div></td> <td> </td> <td> </td> <td align="right">1,283,942</td> <td> </td> <td> </td> <td> </td> <td align="right">507,947</td> <td> </td> <td> </td> <td> </td> <td align="right">1,379,778</td> <td> </td> <td> </td> <td> </td> <td align="right">567,194</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Information & Media </div></td> <td> </td> <td> </td> <td align="right">461,628</td> <td> </td> <td> </td> <td> </td> <td align="right">17,194</td> <td> </td> <td> </td> <td> </td> <td align="right">510,316</td> <td> </td> <td> </td> <td> </td> <td align="right">36,525</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total operating segments </div></td> <td> </td> <td> </td> <td align="right">2,613,387</td> <td> </td> <td> </td> <td> </td> <td align="right">469,553</td> <td> </td> <td> </td> <td> </td> <td align="right">2,891,096</td> <td> </td> <td> </td> <td> </td> <td align="right">583,133</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">General corporate expense </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(62,734</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(67,392</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Interest expense — net </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(39,090</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(38,184</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total Company </div></td> <td> </td> <td align="right">$</td> <td align="right">2,613,387</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">367,729</td> <td nowrap="nowrap">*</td> <td> </td> <td align="right">$</td> <td align="right">2,891,096</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">477,557</td> <td nowrap="nowrap">*</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" nowrap="nowrap" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">*</td> <td> </td> <td>Income before taxes on income</td> </tr> </table>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div style="margin-top: 12pt"> </div> </div> </body> </html>

<html> <head></head> <body>  <div style="font-family: 'Times New Roman',Times,serif"> <div style="margin-top: 12pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left">5.</td> <td width="1%"> </td> <td><b>Stock-Based Compensation</b></td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>Stock-based compensation for the periods ended June 30 is as follows:</td> </tr> </table> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Six Months</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Stock option expense </div></td> <td> </td> <td align="left">$</td> <td align="right">4,783</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">7,009</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">11,171</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">13,441</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Restricted stock awards expense </div></td> <td> </td> <td> </td> <td align="right">4,620</td> <td> </td> <td> </td> <td> </td> <td align="right">14,947</td> <td> </td> <td> </td> <td> </td> <td align="right">6,062</td> <td> </td> <td> </td> <td> </td> <td align="right">29,559</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total stock-based compensation expense </div></td> <td> </td> <td align="left">$</td> <td align="right">9,403</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">21,956</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">17,233</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">43,000</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The number of common shares issued upon exercise of stock options and the vesting of restricted stock awards are as follows:</td> </tr> </table> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>June 30,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>December 31,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>June 30,</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 0px solid #000000">(in thousands)</td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2008</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Stock options exercised </div></td> <td> </td> <td> </td> <td align="right">270</td> <td> </td> <td> </td> <td> </td> <td align="right">1,433</td> <td> </td> <td> </td> <td> </td> <td align="right">1,088</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Restricted stock vested </div></td> <td> </td> <td> </td> <td align="right">1,421</td> <td> </td> <td> </td> <td> </td> <td align="right">678</td> <td> </td> <td> </td> <td> </td> <td align="right">670</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td nowrap="nowrap" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total shares issued </div></td> <td> </td> <td> </td> <td align="right">1,691</td> <td> </td> <td> </td> <td> </td> <td align="right">2,111</td> <td> </td> <td> </td> <td> </td> <td align="right">1,758</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td> </td> <td align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td> </td> <td align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div style="margin-top: 12pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> </table> </div> </div> </body> </html>

<html> <head></head> <body>  <div style="font-family: 'Times New Roman',Times,serif"> <div style="margin-top: 12pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left">6.</td> <td width="1%"> </td> <td><b>Allowances, Inventories and Accumulated Amortization of Prepublication Costs</b></td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The allowances for doubtful accounts and sales returns, the components of inventory and the accumulated amortization of prepublication costs are as follows:</td> </tr> </table> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Allowance for doubtful accounts </div></td> <td> </td> <td align="left">$</td> <td align="right">70,176</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">76,341</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">68,038</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Allowance for sales returns </div></td> <td> </td> <td align="left">$</td> <td align="right">119,610</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">192,344</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">127,561</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Inventories: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Finished goods </div></td> <td> </td> <td align="left">$</td> <td align="right">377,320</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">349,203</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">471,815</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Work-in-process </div></td> <td> </td> <td> </td> <td align="right">3,454</td> <td> </td> <td> </td> <td> </td> <td align="right">4,359</td> <td> </td> <td> </td> <td> </td> <td align="right">7,138</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Paper and other materials </div></td> <td> </td> <td> </td> <td align="right">9,111</td> <td> </td> <td> </td> <td> </td> <td align="right">16,117</td> <td> </td> <td> </td> <td> </td> <td align="right">17,641</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total inventories </div></td> <td> </td> <td align="left">$</td> <td align="right">389,885</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">369,679</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">496,594</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Accumulated amortization of prepublication costs </div></td> <td> </td> <td align="left">$</td> <td align="right">838,384</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">943,022</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">787,619</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div style="margin-top: 12pt"> </div> </div> </body> </html>

<html> <head></head> <body>  <div style="font-family: 'Times New Roman',Times,serif"> <div style="margin-top: 12pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left">7.</td> <td width="1%"> </td> <td><b>Debt</b></td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>A summary of short-term and long-term debt outstanding follows:</td> </tr> </table> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">5.375% Senior notes, due 2012 (a) </div></td> <td> </td> <td align="left">$</td> <td align="right">399,763</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">399,727</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">399,692</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">5.900% Senior notes, due 2017 (b) </div></td> <td> </td> <td> </td> <td align="right">399,200</td> <td> </td> <td> </td> <td> </td> <td align="right">399,152</td> <td> </td> <td> </td> <td> </td> <td align="right">399,104</td> <td> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">6.550% Senior notes, due 2037 (c) </div></td> <td> </td> <td> </td> <td align="right">398,507</td> <td> </td> <td> </td> <td> </td> <td align="right">398,482</td> <td> </td> <td> </td> <td> </td> <td align="right">398,455</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Commercial paper </div></td> <td> </td> <td> </td> <td align="right">89,600</td> <td> </td> <td> </td> <td> </td> <td align="right">70,000</td> <td> </td> <td> </td> <td> </td> <td align="right">526,200</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Note payable </div></td> <td> </td> <td> </td> <td align="right">253</td> <td> </td> <td> </td> <td> </td> <td align="right">272</td> <td> </td> <td> </td> <td> </td> <td align="right">290</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total debt </div></td> <td> </td> <td> </td> <td align="right">1,287,323</td> <td> </td> <td> </td> <td> </td> <td align="right">1,267,633</td> <td> </td> <td> </td> <td> </td> <td align="right">1,723,741</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Less: short-term debt including current maturities </div></td> <td> </td> <td> </td> <td align="right">89,622</td> <td> </td> <td> </td> <td> </td> <td align="right">70,022</td> <td> </td> <td> </td> <td> </td> <td align="right">526,222</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Long-term debt </div></td> <td> </td> <td align="left">$</td> <td align="right">1,197,701</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">1,197,611</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">1,197,519</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div style="margin-top: 12pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td><u><b>Senior Notes</b></u></td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>(a) As of June 30, 2009, the Company had outstanding $399.8 million of 2012 senior notes consisting of $400 million principal and an unamortized debt discount of $0.2 million. The 2012 senior notes, when issued in November 2007, were priced at 99.911% with a yield of 5.399%. Interest payments are required to be made semiannually on February 15 and August 15.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>(b) As of June 30, 2009, the Company had outstanding $399.2 million of 2017 senior notes consisting of $400 million principal and an unamortized debt discount of $0.8 million. The 2017 senior notes, when issued in November 2007, were priced at 99.76% with a yield of 5.933%. Interest payments are required to be made semiannually on April 15 and October 15.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>(c) As of June 30, 2009, the Company had outstanding $398.5 million of 2037 senior notes consisting of $400 million principal and an unamortized debt discount of $1.5 million. The 2037 senior notes, when issued in November 2007, were priced at 99.605% with a yield of 6.580%. Interest payments are required to be made semiannually on May 15 and November 15.</td> </tr> </table> </div> <div style="margin-top: 12pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td><u><b>Available Financing</b></u></td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The size of the Company’s total commercial paper program remains $1.2 billion and is supported by the revolving credit agreement described below. Commercial paper borrowings outstanding at June 30, 2009 and 2008 totaled $89.6 million and $526.2 million, respectively, with an average interest rate and average term of 0.2% and 13 days, and 2.2% and 27 days, respectively. These total borrowings are classified as current notes payable in the consolidated balance sheet. Commercial paper borrowings outstanding at December 31, 2008 totaled $70.0 million, with an average interest rate and average term of 1.4% and 29 days.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>On September 12, 2008 the Company closed on two new revolving credit facility agreements totaling $1.15 billion collectively (the “new credit facility”) to replace the existing $1.2 billion five-year credit facility that was to expire on July 20, 2009. The new credit facility is with a syndicate of fourteen banks led by JP Morgan Chase and Bank of America. The existing credit facility was cancelled after the new facility became effective.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The new credit facility consists of two separate tranches, a $383.3 million 364-day facility that will terminate on September 11, 2009 and a $766.7 million 3-year facility that will terminate on September 12, 2011. The Company pays a commitment fee of 8-17.5 basis points for the 364-day facility and a commitment fee of 10-20 basis points for the 3-year facility, depending upon the credit rating of the Company, whether or not amounts have been borrowed. At the Company’s current credit rating, the commitment fee is 8 basis points for the 364-day facility and 10 basis points for the 3-year facility. The interest rate on borrowings under the credit facility is, at the Company’s option, based on (i) a spread over the prevailing London Inter-Bank Offer Rate (“LIBOR”) that is calculated by multiplying the current 30 business day average of the CDX 5-year investment grade index by a percentage, ranging from 50-100% that is based on the Company’s credit rating (“LIBOR loans”), which at the Company’s current credit rating, the borrowing rate would be 50% of this index, with a minimum spread of 0.5%, or (ii) on the higher of prime, which is the rate of interest publicly announced by the administrative agent, or 0.5% plus the Federal funds rate (“ABR loans”).</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The Company has the option at the termination of the 364-day facility to convert any revolving loans outstanding into term loans for an additional year. Term loans can be LIBOR loans or ABR loans and would carry an additional spread of 0.35%.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The new credit facility contains certain covenants. The only financial covenant requires that the Company not exceed indebtedness to cash flow ratio, as defined in the new credit facility, of 4 to 1. This covenant is similar to the previous credit agreements and has never been exceeded. There were no borrowings under either of the facilities as of June 30, 2009, December 31, 2008 and June 30, 2008. </td> </tr> </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The Company has the capacity to issue Extendible Commercial Notes (“ECNs”) of up to $240 million, provided that sufficient investor demand for ECNs exists. ECNs replicate commercial paper, except that the Company has an option to extend the note beyond its initial redemption date to a maximum final maturity of 390 days. However, if exercised, such an extension is at a higher reset rate, which is at a predetermined spread over LIBOR and is related to the Company’s commercial paper rating at the time of extension. As a result of the extension option, no backup facilities for these borrowings are required. As is the case with commercial paper, ECNs have no financial covenants. There were no ECN borrowings outstanding as of June 30, 2009, December 31, 2008 and June 30, 2008. In the current credit environment, the ECN market is not available and the Company has no plans to utilize this market.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>On April 19, 2007, the Company signed a promissory note with one of its providers of banking services to enable the Company to borrow additional funds, on an uncommitted basis, from time to time to supplement its commercial paper and ECN borrowings. The specific terms (principal, interest rate and maturity date) of each borrowing governed by this promissory note are determined on the borrowing date of each loan. These borrowings have no financial covenants. There were no promissory note borrowings outstanding as of June 30, 2009, December 31, 2008 and June 30, 2008. In the current credit environment, the market for these instruments is currently not available and the Company has no plans to utilize them in the short-term.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>On January 1, 2009, the Company transferred most of Standard & Poor’s U.S. properties and assets from a division to a newly-formed, wholly-owned subsidiary. This reorganization was initiated to address future operational and financial conditions, and will not affect the ongoing conduct of Standard & Poor’s businesses, including the credit ratings business.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>In conjunction with this reorganization, a series of supplemental agreements were executed. They include a supplemental indenture for the Company’s $1.2 billion senior notes (three tranches of $400 million due in 2012, 2017 and 2037), amendments to the company’s current $1.15 billion Credit Agreement (including both the 364-day and the 3-year agreements), amendments to the commercial paper issuing and paying agency agreement (with JP Morgan Chase) and amended and restated commercial paper dealer agreements (with JP Morgan Chase, Morgan Stanley and Merrill Lynch). All of these agreements and amendments provide that the new S&P subsidiary will guarantee the senior notes issued pursuant to the indenture, amounts borrowed under the credit agreement and the commercial paper.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>Long-term debt was $1,197.7 million, $1,197.6 million and $1,197.5 million as of June 30, 2009, December 31, 2008 and June 30, 2008, respectively. The carrying amount of the Company’s borrowings approximates fair value at June 30, 2009. The Company paid interest on its debt totaling $25.0 million and $26.9 million during the three months ended June 30, 2009 and 2008, respectively, and $35.8 million and $34.2 million during the six months ended June 30, 2009 and 2008, respectively.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>In the second quarter of 2008, cash was utilized to repurchase approximately 3.3 million shares for $141.5 million on a settlement date basis. An additional 0.7 million shares were repurchased in the second quarter of 2008, which settled in July 2008. Accordingly, the Company recorded a liability of $29.2 million, classified in other current liabilities at June 30, 2008.</td> </tr> </table> </div> <div style="margin-top: 12pt"> </div> </div> </body> </html>

<html> <head></head> <body>  <div style="font-family: 'Times New Roman',Times,serif"> <div style="margin-top: 12pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left">13.</td> <td width="1%"> </td> <td><b>Restructuring</b></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td><b><u>2009 Restructuring</u></b></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td> During the second quarter of 2009, the Company initiated a restructuring plan that included a realignment of select business operations within the McGraw-Hill Education segment to further strengthen their position in the market by creating a market focused organization that enhances its ability to address the changing needs of their customers. Additionally, the Company continued to implement restructuring plans related to a limited number of business operations across the Company to contain costs and mitigate the impact of the current and expected future economic conditions. The Company recorded a pre-tax restructuring charge of $24.3 million, consisting primarily of employee severance costs related to a workforce reduction of approximately 550 positions. This charge consisted of $14.0 million for McGraw-Hill Education, $4.5 million for Financial Services and $5.8 million for Information & Media. In addition, during the second quarter of 2009, the Company revised its estimate for previously recorded restructuring charges and reversed approximately $9.1 million, consisting of $2.4 million for McGraw-Hill Education, $4.9 million for Financial Services and $1.8 million for Information & Media. The net after-tax charge recorded was $9.7 million, or $0.03 per diluted share. Net restructuring expenses for McGraw-Hill Education were $11.6 million classified as selling and general product expenses, within the statement of income. Net restructuring benefit for Financial Services was $0.4 million classified as selling and general service expenses within the statement of income. Net restructuring expenses for Information & Media were $2.3 million classified as selling and general service expenses, and $1.7 million classified as selling and general product expenses, within the statement of income.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>The 2009 restructuring reserve at June 30, 2009 is approximately $24.3 million and is included in other current liabilities.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td><u><b>2008 Restructuring</b></u></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td> During 2008, the Company continued to implement restructuring plans related to a limited number of business operations across the Company to contain costs and mitigate the impact of the current and expected future economic conditions. The Company recorded a pre-tax restructuring charge of $73.4 million, consisting primarily of employee severance costs related to a workforce reduction of approximately 1,045 positions. This charge consisted of $25.3 million for McGraw-Hill Education, $25.9 million for Financial Services, $19.2 million for Information & Media and $3.0 million for Corporate. The after-tax charge recorded was $45.9 million, or $0.14 per diluted share. Restructuring expenses for McGraw-Hill Education were $20.8 million classified as selling and general product expenses, and $4.5 million classified as selling and general service expenses, within the statement of income. Restructuring expenses for Financial Services were classified as selling and general service expenses within the statement of income. Restructuring expenses for Information & Media were $18.9 million classified as selling and general service expenses, and $0.3 million classified as selling and general product expenses, within the statement of income. Restructuring charges for Corporate were classified as selling and general service expenses within the statement of income.</td> </tr> </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>For the three and six months ended June 30, 2009, the Company has paid approximately $15.0 million and $30.5 million, respectively, and reversed approximately $2.9 million related to the 2008 restructuring, consisting primarily of employee severance costs. The remaining reserve at June 30, 2009 is approximately $17.4 million and is included in other current liabilities.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td><u><b>2007 Restructuring</b></u></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>During 2007, the Company began implementing a restructuring plan related to a limited number of business operations across the Company to gain efficiencies, reflect current business conditions and to fortify its long-term growth prospects. As a result, the Company recorded a pre-tax restructuring charge of $43.7 million, consisting primarily of employee severance costs related to a workforce reduction of approximately 600 positions across the Company. This charge comprised $16.3 million for McGraw-Hill Education, $18.8 million for Financial Services, $6.7 million for Information & Media and $1.9 million for Corporate. The after-tax charge recorded was $27.3 million, or $0.08 per diluted share. Restructuring expenses for Financial Services and Corporate are classified as selling and general service expenses within the statement of income. Restructuring expenses for McGraw-Hill Education are classified as selling and general product expenses, $15.0 million, and selling and general service expense, $1.3 million, within the statement of income. Restructuring expenses for Information and Media are classified as selling and general product expenses, $0.4 million, and selling and general service expense, $6.3 million, within the statement of income.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>For the three and six months ended June 30, 2009, the Company has paid approximately $0.9 million and $2.2 million, respectively, and reversed approximately $6.2 million related to the 2007 restructuring, consisting primarily of employee severance costs. The remaining reserve at June 30, 2009 is approximately $0.7 million and is included in other current liabilities.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td><u><b>2006 Restructuring</b></u></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>During 2006, the Company recorded a pre-tax restructuring charge of $31.5 million, consisting primarily of vacant facilities and employee severance costs related to the elimination of 700 positions across the Company. This charge comprised $16.0 million for McGraw-Hill Education, $8.7 million for Information & Media and $6.8 million for Corporate. The after-tax charge recorded was $19.8 million, or $0.06 per diluted share. Restructuring expenses for Information & Media and Corporate are classified as selling and general service expenses within the statement of income. Restructuring expenses for McGraw-Hill Education are classified as selling and general product expenses, $9.3 million, and selling and general service expense, $6.7 million, within the statement of income.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>For the three and six months ended June 30, 2009, the Company has paid approximately $0.4 million and $0.7 million, respectively, related to the 2006 restructuring consisting of facility costs. At June 30, 2009, the remaining reserve, which consists of facilities costs, is approximately $7.3 million payable through 2014.</td> </tr> </table> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> </table> </div> </div> </body> </html>

<html> <head></head> <body>  <div style="font-family: 'Times New Roman',Times,serif"> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left">14. </td> <td width="1%"> </td> <td> <b>Recently Issued Accounting Standards</b> </td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 168”). SFAS No. 168 replaces SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” and establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with Generally Accepted Accounting Principles. SFAS No. 168 is effective for interim and annual periods ending after September 15, 2009 and will not have a material impact on the Company’s consolidated financial statements.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="3%" nowrap="nowrap" align="left"> </td> <td width="1%"> </td> <td>In December 2008, the FASB issued FASB Staff Position (“FSP”) FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”). FSP FAS 132(R)-1 amends SFAS No. 132(R), “Employers’ Disclosures about Pension and Other Postretirement Benefits” and provides guidance on an employer’s disclosure about plan assets of a defined benefit pension or other postretirement plan. FSP FAS 132(R)-1 is effective for fiscal years ending after December 15, 2009. The Company is currently evaluating the impact FSP FAS 132(R)-1 will have on its consolidated financial statements.</td> </tr> </table> </div> </div> </body> </html>

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