UPDATE 2-McGraw-Hill restructuring costs weigh on results

* Quarterly net income falls 14 pct vs year earlier

* Excluding restructuring costs, profit up 3 pct

* Adjusted EPS $1.33 vs. analyst estimate $1.30

* CEO says will act on education unit sale in ``weeks''

* Shares down 2.2 pct in midday trading

Nov 2 (Reuters) - The McGraw-Hill Cos Inc reported a 14 percent decline in third-quarter profits as a rebound in new bond issues needing credit ratings failed to make up for corporate restructuring costs and weak demand for educational texts.

The company, which owns Standard & Poor's bond-rating service, said on Friday that revenue from new bond issues surged 64 percent from a year earlier, when the European debt crisis was a bigger burden on the markets.

But the New York-based company also said it spent $99 million in the quarter to restructure and cut ongoing costs and that revenue in its education publishing business declined 11 percent amid the weakest demand for school texts in a decade.

The company has been considering bids from potential buyers for the education business and CEO Terry McGraw told analysts in a conference call that he expects to announce ``in coming weeks, and maybe sooner,'' whether the company will sell the unit or go ahead with another plan to spin it off to shareholders as a separate public company that would be known as McGraw-Hill Education.

Educational publishers have been hit by reduced spending for elementary and high school texts in the United States as local government budgets have been hurt by falling property tax revenues after the housing market plunge.

At the same time, publishers are under pressure to develop new digital products, which could ultimately reduce their costs but which need investment now.

The education unit is expected to draw final bids from private equity firms Bain Capital and Apollo Global Management as well as rival Cengage Learning Inc, in a deal that could fetch around $3 billion, Reuters reported last month.

For the entire company, third-quarter net income fell 14 percent to $314 million from a year earlier, according to a statement.

Excluding the restructuring costs, the results beat the average estimate from analysts, according to Thomson Reuters I/B/E/S. On that basis, McGraw-Hill profits rose 3 percent to $379 million, or $1.33 per share, compared with an average estimate of $1.30 and the year-earlier per share result of $1.21.

Much of the increase in earnings per share was the result of a more aggressive share buyback program the company undertook last year as institutional investors increased pressure for higher stock returns. The sale or spinoff of the education business and the cost-cutting steps are other parts of the plan the company announced to increase shareholder value.

The company has said the cost-cutting plan will reduce annual expenses by about $100 million a year. McGraw, when pressed by an analyst during the conference call on why the expected savings are not greater, said he expects the company to announce a higher target next year after separating the education unit.

Shares of the company were down 2.2 percent to $55.24 in noon trading on Friday.

Revenue for the education business fell 11 percent from a year earlier to $836 million, the company said. The unit's operating profits, excluding the restructuring costs, fell 15 percent.

At Standard & Poor's Rating Services, McGraw said much of the surge in revenue from new ratings came from a dramatic increase in issues of speculative grade, or junk, corporate bonds from companies based in the United States after government central banks on both sides of the Atlantic took more aggressive steps to keep interest rates low.

McGraw-Hill raised slightly its guidance for full-year results, saying it expects an adjusted profit of $3.35 to $3.40 per share, up from its previous forecast of $3.25 to $3.35 per share.

Rival bond-rater Moody's Corp also reported a strong profit last week on a wave of new debt issues, many from corporations looking to cut their interest expense.

The two ratings companies continue to pay increased regulatory and litigation costs for mistakes they made putting investment grades on complex instruments tied to subprime mortgages. Executives at both companies said they continue to win court decisions in cases brought by investors who lost money on the instruments. Some large cases, however, remain open.