McGraw-Hill Ryerson Limited
TSX : MHR

McGraw-Hill Ryerson Limited

February 03, 2006 16:32 ET

McGraw-Hill Ryerson Reports 2005 Annual Results

WHITBY, ONTARIO--(CCNMatthews - Feb. 3, 2006) -

Attention: Business/Financial Editors



Three Months to December 31, 2005 ($000) This Year Year Ago
---------------------------------

Sales, less returns $23,164 $22,828
Other 783 844
------- -------
Total revenue $23,947 $23,672

Net Income 1,552 2,563
Net Income per share $ 0.78 $ 1.28

Twelve Months to December 31, 2005 ($000)
----------------------------------

Sales, less returns $85,557 $87,223
Other 2,150 2,003
------- -------
Total revenue $87,707 $89,226

Net Income 5,829 7,023
Net Income per share $ 2.92 $ 3.52


Note: Financial information commences on page 4 of this press release.

Annual Results

McGraw-Hill Ryerson's sales less returns (net sales) decreased in 2005 by 1.9%, with sales of $85.6 million, compared to $87.2 million in 2004.

McGraw-Hill Ryerson's Higher Education Division increased sales and gained additional market share in 2005. Sales grew by 1.5% over 2004 with sales of $52.9 million in 2005 up from $52.1 million. The School Division sales decreased to $21.8 million, or 10.8% lower than 2004. This decrease was predicted due to the continued shift in government funding from the secondary school market to the elementary market. The Professional Division sales increased to $9.9 million, a 2.1% increase over prior year. This division reported strong results in Business and General reference titles, and benefited from an overall increase in consumer spending.

Operating expenses, comprised of cost of product and royalties, decreased to $39.5 million from $39.7 million. This 0.4% decrease is a result of the sales decrease.

Editorial, selling, general, and administrative expenses increased 1.9% to $31.3 million from $30.7 million in 2004. This increase is due to a restructuring that occurred in our Higher Education sales force as well as our warehouse operations. The restructuring in the warehouse was a result of the termination of the Company's warehousing and fulfillment contract with Montreal-based publisher, De La Cheneliere, in December 2005. This contract generated $1.4 million of pre-tax income in 2005. The Company has signed a warehousing and distribution agreement with a Canadian-based publisher to help offset a portion of this impact on 2006 results. Excluding the restructuring charges, the editorial, selling, general and administrative expenses decreased 1.0% from 2004. This is a result of productivity improvements across many divisions of the Company. These expenses as a percentage of sales have increased to 36.6% of sales (35.5% excluding the reorganization costs) from 35.2% last year.

The Company's total amortization expense decreased 8.8%. Prepublication amortization decreased 7.8% to $6.2 million from $6.7 million in the prior year. The decrease is due to the reduction of investment in the School Division during recent years, while provincial funding has focused away from the secondary school market. Capital asset amortization has decreased 12.8% as a result of the Company leveraging more of the US parent's technology.

Earnings per share were $2.92 compared to $3.52 last year. This decline is mainly attributable to the sales decrease, as well as restructuring costs.

Cash levels at December 31, 2005 have increased to $27.2 million from $21.5 million in 2004. This is due to improved distribution processes (resulting in reduced inventory levels), strong collection results and a decrease in prepublication investment in recent years.

Q4 Results

Company-wide net sales increased 1.5%. This increase occurred mainly in the Company's School Division, which successfully closed several large sales in Atlantic Canada.

The Company recorded a $900,000 restructuring charge to Editorial, Selling, General and Administrative expenses during the fourth quarter. This is the result of a reorganization of the Higher Education Division's sales force as well as the Warehouse operations. Bottom line income was $1.5M compared to $2.6M last year, mainly the result of these restructuring charges.

The accompanying financial statements should be read in conjunction with the "Notes to Financial Statements" included in McGraw-Hill Ryerson's Annual Report.

In business since 1944, McGraw-Hill Ryerson Limited is a leading Canadian publisher of educational resources, and information products and services for lifelong learning and enjoyment. Revenue in 2005 was $88 million. Additional information is available at http://www.mcgrawhill.ca.



BALANCE SHEETS
--------------
(unaudited)
(In thousands of dollars)
As at December 31 2005 2004
---------------------------------------------------------------------

ASSETS
Current
Cash $ 27,206 $21,496
Accounts receivable 17,503 17,231
Due from affiliated companies 2,638 2,776
Inventories 8,006 11,543
Prepaid expenses and other 407 328
Income taxes receivable 190 -
Future tax assets 2,535 2,411
---------------------------------------------------------------------

Total current assets 58,485 55,785

---------------------------------------------------------------------

Capital assets, net 18,716 19,733
Other assets, net 10,483 11,854

---------------------------------------------------------------------

Total assets $87,684 $87,372

---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES & SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued
charges $9,906 $ 7,409
Income taxes payable 0 453
Due to parent and affiliated
companies 6,181 8,735

---------------------------------------------------------------------

Total current liabilities 16,147 16,597

---------------------------------------------------------------------

Future tax liabilities 398 942

---------------------------------------------------------------------

Total liabilities 16,545 17,539

---------------------------------------------------------------------
Shareholders' equity
Share capital
Authorized - 5,000,000 common
shares
Issued and outstanding - 1,996,638
common shares 1,997 1,997
Retained earnings 69,142 67,836

---------------------------------------------------------------------

Total shareholders' equity 71,139 69,833

---------------------------------------------------------------------

Total liabilities and shareholders'
equity $87,684 $87,372

---------------------------------------------------------------------
---------------------------------------------------------------------



STATEMENTS OF INCOME
--------------------
(unaudited)

(In thousands of dollars except per share data)
For the year ended December 31 2005 2004
---------------------------------------------------------------------

Revenue
Sales, less returns $ 85,557 $ 87,223
Other 2,150 2,003

---------------------------------------------------------------------

Total revenue 87,707 89,226

---------------------------------------------------------------------

Expenses
Operating 39,496 39,670
Editorial, selling, general, and
administrative 31,296 30,697
Amortization 7,609 8,339
Exchange loss (gain) 89 (248)

---------------------------------------------------------------------

Total operating expenses 78,490 78,458

---------------------------------------------------------------------

Income before income taxes 9,217 10,768

---------------------------------------------------------------------

Provision for/(recovery of) income taxes
Current 3,951 4,228
Future (563) (483)

---------------------------------------------------------------------

3,388 3,745

---------------------------------------------------------------------

Net income for the year $ 5,829 $ 7,023

Retained earnings, beginning of
year $ 67,836 $ 62,221
Dividends paid to shareholders
($2.265 per share; 2004-$0.705 per
share) (4,523) (1,408)

---------------------------------------------------------------------

Retained earnings, end of year $ 69,142 $ 67,836

---------------------------------------------------------------------
---------------------------------------------------------------------

Earnings per share

Basic - net income for the period $ 2.92 $ 3.52
Diluted - net income for the period $ 2.92 $ 3.52

---------------------------------------------------------------------
---------------------------------------------------------------------



STATEMENTS OF CASH FLOW
-----------------------
(unaudited)

(In thousands of dollars)
For the year ended December 31 2005 2004
---------------------------------------------------------------------

OPERATING ACTIVITIES
Net income for the year $ 5,829 $ 7,023
Add/deduct non cash items:
Future income taxes (668) (483)
Amortization 7,609 8,339
---------------------------------------------------------------------
12,771 14,879

Net change in non-cash working
capital balances related to operations 2,684 (7,689)
---------------------------------------------------------------------

Cash provided by operating
activities 15,454 7,190

---------------------------------------------------------------------

INVESTING ACTIVITIES
Prepublication costs (4,844) (5,079)
Capital assets (377) (659)

---------------------------------------------------------------------

Cash used in investing activities (5,221) (5,738)

---------------------------------------------------------------------

FINANCING ACTIVITIES
Dividends paid to shareholders (4,523) (1,408)

---------------------------------------------------------------------

Cash used in financing activities (4,523) (1,408)

---------------------------------------------------------------------

Net increase in cash during period 5,710 44
Cash, beginning of year 21,496 21,452

---------------------------------------------------------------------

Cash, end of year 27,206 21,496

---------------------------------------------------------------------
---------------------------------------------------------------------

Supplemental cash flow information
Interest paid $ - $ -
Income taxes refunded $ (87) $ -
Income taxes paid $ 4,832 $ 5,743
---------------------------------------------------------------------
---------------------------------------------------------------------



Contact Information

  • McGraw-Hill Ryerson Limited
    Gordon Dyer
    Executive Vice President and Chief Financial Officer
    (905) 430-5032
    (905) 430-5020 (FAX)
    http://www.mcgrawhill.ca