This is a partial transcript from Your World with Neil Cavuto, October 24, 2001.
NEIL CAVUTO, HOST: Well, you know, not very many media companies reporting a profit these days. Big losses in ad sales make a dent in the bottom line.
My next guest, though, reporting a profit and a pretty respectable one at that. Joining us now is Terry McGraw, the CEO of McGraw-Hill.
Good to see you, sir.
TERRY MCGRAW, CEO, MCGRAW-HILL: Thank you, Neil. Good to be with you.
CAVUTO: Nice going. A 10 percent uptick in activity ain't bad in this environment. What was doing it?
MCGRAW: Well, it was two of our businesses that were doing it. The financial service side with Standard & Poor's. With the lower interest rates and more financial instruments coming to the marketplace, we were able to get a lot of the refunding and refinancing activity. Corporate, municipals, structured finance, and even Europe in helping us there.
The other is the education side, and that one was very strong in both the elementary and high-school side. But in particular, also, the higher education side. And...
CAVUTO: See, that surprised me, because you'd think with cutbacks in education budgets and the like, and schools and municipalities really curtailing that would be one thing I thought would have hurt, but it did not.
MCGRAW: No. We're actually seeing enrollments going up, especially in the higher ed and the post-graduate, you know, period as well. I guess with the poor economy and those kinds of conditions, a lot of people going back, getting new skill sets and the like, and we're benefiting from that.
CAVUTO: Not so in the traditional media world, right?
MCGRAW: No, the traditional media inside our Business Week and our broadcasting properties and our other publications are all hurt very, very significantly here. We thought we were going to get a little bounceback in the fourth quarter as we started to see this, but I think September 11th, you know, is going to elongate that.
We look for next year, though, to be a much better year than some people are looking at, and we think once we get through the first quarter we'll start to see some pickup in the second.
CAVUTO: You know, Terry, I have a crackpot theory on the market, one of my many, and one is that watch media stocks, because they can be the first to take you out of it, because they tend to be good precursors. Yours has picked up since the attack, and News Corp has picked up, Disney has picked up. Even AOL Time Warner, despite, you know, a disappointing report, has picked up.
Should I read anything into that?
MCGRAW: Oh, I think you should. I think those are very good bellwethers. When you take a look at a magazine like Business Week that has a very broad advertising base and has very broad editorial coverage as well, and you know, we're one of the last to go out and one of the first to come back in. And that is really because of the fact that you mirror so closely a lot of the economic indicators: business and consumer confidence levels. Capital spending, and then profit pickup.
So, yes, I think those are very good bellwethers to watch in terms of the market activity.
CAVUTO: What about the market activity? Are we through the worst of it? When we look back at the 8,235 levels of the 21st, will we say, that was...
MCGRAW: I think we all the makings of a bottom right here. I think the fourth quarter is going to show a little bit more negativity. The first quarter will be slow, and then we'll start to see it pick up.
The interest rate cut effect is going to be very important. It hasn't really kicked in at this point. But also, government spending. The government spending is, you know, is very, very smart at this point. It is going to help business and consumer confidence levels, and get that capital spending going.
The consumer's out. Business investment is out. Net exports is out. Government spending is the only other thing that makes up gross domestic product, and government spending is doing it.
CAVUTO: All right, Terry, always a pleasure seeing you.
MCGRAW: Thanks. Good to be with you.
CAVUTO: Thank you very much. Terry McGraw is the CEO of McGraw-Hill.
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