McGraw-Hill Ryerson Limited

TSX : MHR


McGraw-Hill Ryerson Limited

February 15, 2013 16:00 ET

McGraw-Hill Ryerson Reports 2012 Annual Results

WHITBY, ONTARIO--(Marketwire - Feb. 15, 2013) - McGraw-Hill Ryerson (TSX:MHR) -

Attention: Business/Financial Editors

Three Months to December 31 ($000)
(unaudited)
This Year Year Ago
Sales, less returns $ 18,931 $ 20,086
Other 3,130 527
Rental 182 134
Total Revenue $ 22,243 $ 20,747
Net Income
4,440

2,645
Net Income per share $ 2.22 $ 1.32
Twelve Months to December 31 ($000)
(unaudited)
Sales, less returns $ 72,258 $ 78,953
Other 4,283 2,496
Rental 541 583
Total Revenue $ 77,082 $ 82,032
Net Income
8,145

8,757
Net Income per share $ 4.08 $ 4.39

Annual Results

The Company's sales revenue, less returns, decreased by 8.5% in 2012, with sales of $72.3 million, compared to $79.0 million in 2011.

The Higher Education Division experienced a decrease in overall revenue of 6.4% compared to 2011, driven by a decline in sales of print partially offset by strong growth in digital solutions. Higher Education continued its industry leadership in the technology-enabled evolution of education with the success of McGraw-Hill Connect, the eBook and online homework solution, and the LearnSmart Advantage suite of adaptive learning solutions. Industry-wide sales in this sector declined 2.3% according to the Canadian Publishers' Council data.(1)

The School Division's sales decreased by 9.7% compared to the previous year. The decline in revenue from the Canadian publishing program is a function of non-repeating 2011 sole source contracts and industry-wide sales declines, the result of slow release of new curriculum and funding in Ontario. Industry sales declined by 6.7% relative to 2011 (based on Canadian Education Resource Council data).(2)

Professional Division sales declined by 21.8% in 2012 compared to 2011. The decline in sales was partly the result of on-going transition to e-book sales, with lower unit revenue, and to particularly high returns in some print product categories. Digital sales again grew strongly in 2012, and are expected to continue to perform well as market demand shifts from print to digital content.

Cost of goods sold decreased to $26.8 million in 2012, from $29.5 million in 2011. Margins on sales improved as a result of a change in product mix compared to last year.

Operating expenses remained consistent at $30.2 million in 2012. There were reductions in promotion and compensation expenses that were offset by a restructuring charge of $1.1 million. This restructuring will improve the expense base of the company to better suit our growing focus on digital learning solutions.

Amortization expenses for pre-publication costs decreased to $8.5 million in 2012 compared to $9.0 million in 2011. The decrease is attributable to the delay in government curriculum revisions for the School publishing program. Depreciation expense for capital assets decreased slightly to $0.8 million from $0.9 million in 2011.

Finance income decreased by $0.1 million, driven by lower average cash balances in 2012 compared to 2011. Finance costs in 2012, consisting mainly of banking charges, increased by $0.1 million.

Net income decreased to $8.1 million from $8.8 million last year, mainly driven by the sales decrease.

Cash and cash equivalents decreased to $15.1 million as of December 31, 2012 from $41.9 million in 2011, which is mainly a result of the special dividend payments made during the year. Total dividend payments were $40.3 million in 2012 compared to $12.2 million in 2011. Excluding special dividends, cash and cash equivalents balances increased by $1.2 million in 2012 compared to 2011.

Q4 Results

Most of the Company's sales revenue is seasonal, based on the education industry's school terms for the School and Higher Education divisions. As a result, the Company earns a significant amount of its total sales revenue in the third and fourth quarters of each year.

In the fourth quarter of 2012, total revenue increased 7.2% compared to the prior quarter, caused mainly by one-time retroactive copyright income. Higher Education sales increased to $15.0 million from $14.9 million. School division sales decreased $0.6 million, compared to the fourth quarter of 2011, to $2.6 million. Professional sales decreased $0.7 million from $2.0 million in 2011 as a result of the softening in consumer demand this year. Net income increased by $1.8 million in the fourth quarter compared to the corresponding quarter in 2011, mainly driven by the revenue increase.

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. Total revenue in 2012 was $77 million. Additional information is available at http://www.mcgrawhill.ca.

McGraw-Hill Ryerson Limited
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
[in thousands of dollars except per share data]
For the years ended
December 31
2012 2011
$ $
Sales revenue, less returns 72,258 78,953
Other income 4,283 2,496
Rental income 541 583
Total revenue 77,082 82,032
Cost of goods sold [note 11] 26,754 29,470
Gross profit 50,328 52,562
Operating expenses [notes 5, 7 and 8] 30,208 30,224
Amortization - pre-publication costs [note 6] 8,477 9,047
Depreciation - property, plant and equipment [note 12] 842 949
Operating income 10,801 12,342
Finance income [note 14] 323 386
Finance costs (178 ) (141 )
Foreign exchange gain (loss) 282 (88 )
Income before income taxes 11,228 12,499
Income tax expense [note 9] 3,083 3,742
Net income and comprehensive income for the year
attributable to equity holders of the Company 8,145 8,757
Earnings per share
Basic and diluted $ 4.08 $ 4.39
McGraw-Hill Ryerson Limited
STATEMENTS OF FINANCIAL POSITION
[in thousands of dollars]
As at December 31, December 31,
2012 2011
$ $
ASSETS
Current
Cash and cash equivalents [note 14] 15,146 41,926
Marketable securities [note 14] 799 716
Trade and other receivables, net [note 14] 10,463 11,429
Inventories, net [note 11] 4,601 6,123
Due from parent and affiliated companies [note 10] 1,783 1,925
Prepaid expenses and other assets 333 280
Total current assets 33,125 62,399
Property, plant and equipment, net [note 12] 13,423 14,071
Intangible assets [note 6] 13,754 16,439
Deferred tax assets, net [note 9] 731 494
Total non-current assets 27,908 31,004
61,033 93,403
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables [note 5] 10,691 11,122
Income taxes payable 265 713
Due to parent and affiliated companies [note 10] 4,693 4,784
Total current liabilities 15,649 16,619
Employee future benefits [note 7] 2,353 2,281
Long-term payable [note 5] 350 44
Total liabilities 18,352 18,944
Equity
Issued capital
Authorized 5,000,000 no par value common shares
Issued and outstanding 1,996,638 common shares 1,997 1,997
Paid-in capital 1,081 702
Retained earnings 39,603 71,760
Total equity 42,681 74,459
61,033 93,403
McGraw-Hill Ryerson Limited
STATEMENTS OF CHANGES IN EQUITY
[in thousands of dollars]
Share Paid in Retained
capital capital earnings Total
$ $ $ $
Balance, December 31, 2010 1,997 372 75,232 77,601
Dividends paid ($6.125 per share) - - (12,229 ) (12,229 )
Additional paid-in capital [note 8] - 330 - 330
Net income and comprehensive income attributable to equity holders of the Company - - 8,757 8,757
Balance, December 31, 2011 1,997 702 71,760 74,459
Balance, December 31, 2011 1,997 702 71,760 74,459
Dividends paid ($20.185 per share) - - (40,302 ) (40,302 )
Additional paid-in capital [note 8] - 379 - 379
Net income and comprehensive income attributable to equity holders of the Company - - 8,145 8,145
Balance, December 31, 2012 1,997 1,081 39,603 42,681
McGraw-Hill Ryerson Limited
STATEMENTS OF CASH FLOWS
[in thousands of dollars]
For the years ended December 31
2012 2011
$ $
Operating activities
Net income for the year 8,145 8,757
Add (deduct) charges not affecting cash:
Amortization - pre-publication costs [note 6] 8,477 9,047
Depreciation - property, plant and equipment [note 12] 842 949
(Decrease) increase in employee future benefits 72 (307 )
Deferred taxes [note 9] (237 ) 318
Net change in non-cash working capital balances related to operations [note 15] 1,941 (1,735 )
Cash provided by operating activities 19,240 17,029
Investing activities
Investment in pre-publication costs [note 6] (5,820 ) (7,324 )
Investment in property, plant and equipment [note 12] (194 ) (390 )
Increase (decrease) in marketable securities (83 ) 116
Cash used in investing activities (6,097 ) (7,598 )
Financing activities
Dividends paid to shareholders (40,302 ) (12,229 )
Change in paid-in capital [note 8] 379 330
Cash used in financing activities (39,923 ) (11,899 )
Net (decrease) increase in cash and cash equivalents (26,780 ) (2,468 )
Cash and cash equivalents, beginning of year 41,926 44,394
Cash and cash equivalents, end of year 15,146 41,926

(1) McGraw-Hill Ryerson does not publish in all segments of this sector.

(2) Ibid.

Contact Information

  • McGraw-Hill Ryerson Limited
    Brenda Arseneault
    Vice President and Chief Financial Officer
    (905) 430-5223
    www.mcgrawhill.ca