McGraw-Hill Ryerson Limited
TSX : MHR

McGraw-Hill Ryerson Limited

February 04, 2011 16:00 ET

McGraw-Hill Ryerson Reports 4th Quarter Results

WHITBY, ONTARIO--(Marketwire - Feb. 4, 2011) - McGraw-Hill Ryerson Reports 2010 Annual Results (TSX:MHR) -

Attention: Business/Financial Editors

Three Months to December 31 ($000) This Year Year Ago
(unaudited)        
Sales, less returns $ 20,861 $ 22,167
Other   689   1,014
Total Revenue   21,550 $ 23,181
 
Net Income   3,197   3,644
Net Income per share $ 1.60 $ 1.83
 
Twelve Months to December 31 ($000)        
(unaudited)        
Sales, less returns $ 78,903 $ 85,818
Other   2,177   2,191
Total Revenue $ 81,080 $ 88,009
 
Net Income   7,616   9,296
Net Income per share $ 3.81 $ 4.66

Annual Results

The Company's net sales decreased 8.1% in 2010, with sales of $78.9 million, compared to $85.8 million in 2009.

The Company's Higher Education Division experienced a sales decline of 4% compared to 2009, driven mainly by a decrease in sales of imported titles. Custom and digital sales continued to grow through 2010. This increase is a reflection of both the need for customized and student-focused digital solutions and the ability of McGraw-Hill Ryerson to meet customer demands. The School Division's sales decreased by 17% compared to the previous year. Our Canadian publishing program and our imported products both experienced sales decreases. The decline in revenue from the Canadian publishing program is a function of several factors including: non-repeating 2009 sole-source contracts and industry- wide sales declines, a function of cutbacks in education budgets in many provinces. Professional Division sales declined by 12% in 2010 compared to 2009. This was driven by a reduced number of key publications, a strategic decision to de-emphasize the consumer category, sales from U.S. vendors into Canada, and a shift towards e-book purchases in Canada.

Cost of product and royalties decreased to $30.9 million in 2010, from $35.0 million in 2009. This 12.0% decrease is the result of the 8.1% decrease in sales, as well as a change in product mix.

Editorial, selling, general, and administrative expenses decreased 2.5% to $30.1 million in 2010, from $30.8 million in 2009. In 2010, this expense category included a $0.8 million restructuring charge incurred in the fourth quarter to enhance the Company's long-term growth prospects. Excluding this charge, editorial, selling, general and administrative expenses decreased by $1.5 million. This is mainly the result of decreases in bonus/commissions, fringe benefit costs and general office expenses.

Amortization of pre-publication costs increased by 10.2% to $7.8 million, from $7.0 million in the prior year, driven by the continuing investment in the Canadian publishing program in the Higher Education and School Divisions in recent years. Capital asset amortization decreased to $1.0 million in 2010, compared to $1.1 million in 2009 as a result of the minimal amount of capital investment required in recent years.

Net income declined to $7.6 million from $9.3 million last year, mainly driven by the sales decrease.

Cash and cash equivalents as of December 31, 2010 increased to $44.4 million from $35.9 million in 2009, driven by strong collection results, ongoing inventory management, lower prepublication investment, as well as a tax refund related to prior year.

Q4 Results

The Company's sales are 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 in the third and fourth quarters of each year.

In the fourth quarter of 2010, total revenue decreased 7.0% compared to the prior year, caused by decreased sales in the Higher Education and School Divisions. Higher Education sales decreased to $15.6 million from $16.0 million partially driven by a decline in sales of imported products. School Division sales decreased $0.7 million, compared to the fourth quarter of 2009, to $2.7 million. Professional sales decreased to $2.4 million from $2.6 million in 2009 as a result of the decrease in overall consumer demand this year. Net income declined by $0.4 million.

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 2010 was $81 million. Additional information is available at http://www.mcgrawhill.ca.

McGraw-Hill Ryerson Limited
Incorporated under the laws of Ontario
 
BALANCE SHEETS
[in thousands of dollars]
 
As at December 31    
  2010 2009
  $ $
  (unaudited)  
ASSETS    
Current    
Cash and cash equivalents 44,394 35,878
Marketable securities 832 821
Accounts receivable, net [note 10] 9,273 11,319
Due from parent and affiliated companies [note 2] 1,403 2,564
Inventories, net [note 4] 5,370 6,052
Prepaid expenses and other 291 318
Income taxes receivable 2,368
Future tax assets [note 7] 2,014 2,117
Total current assets 63,577 61,437
Capital assets, net [note 5] 14,630 15,182
Other assets, net [note 6] 18,546 19,411
  96,753 96,030
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current    
Accounts payable and accrued charges 9,949 9,862
Income taxes payable 10
Due to parent and affiliated companies [note 2] 5,047 5,998
Total current liabilities 15,006 15,860
Long-term payable [note 13] 391
Employee future benefits [note 8] 2,083 2,038
Future tax liabilities 1,417 774
Total liabilities 18,897 18,672
Commitments [note 9]    
     
Shareholders' equity    
Share capital    
  Authorized 5,000,000 common shares    
  Issued and outstanding 1,996,638 common shares 1,997 1,997
Retained earnings 75,859 75,361
Total shareholders' equity 77,856 77,358
  96,753 96,030
 
McGraw-Hill Ryerson Limited
 
STATEMENTS OF INCOME, COMPREHENSIVE INCOME AND RETAINED EARNINGS
[in thousands of dollars except per share data]
 
Years ended December 31    
  2010 2009
  $ $
  (unaudited)  
 
REVENUE    
Sales, less returns 78,903 85,818
Other [note 2] 2,177 2,191
  81,080 88,009
 
EXPENSES    
Cost of product and royalties [notes 2 and 4] 30,866 35,062
Editorial, selling, general and administrative [note 2, 3 and 13] 30,057 30,816
Amortization – prepublication costs 7,762 7,045
Amortization – capital assets 951 1,129
Employee future benefits [note 8] 168 115
Foreign exchange loss 105 239
  69,909 74,406
Income before income taxes 11,171 13,603
Provision for income taxes [note 7]    
  Current 2,812 2,764
  Future 743 1,543
  3,555 4,307
Net income and comprehensive income for the year 7,616 9,296
 
Retained earnings, beginning of year 75,361 68,072
     
Dividends paid and payable to shareholders [$3.565 per share; 2009 - $1.005 per share] (7,118) (2,007)
Retained earnings, end of year 75,859 75,361
 
Earnings per share    
Basic and Diluted $3.81 $4.66
 
McGraw-Hill Ryerson Limited   
 
STATEMENTS OF CASH FLOWS  
[in thousands of dollars]  
 
Years ended December 31
  2010 2009
  $ $
  (unaudited)  
 
OPERATING ACTIVITIES    
Net income for the year 7,616 9,296
Add (deduct) non-cash items    
  Amortization – prepublication costs 7,762 7,045
  Amortization – capital assets 951 1,129
  Increase in long-term payable 391
  Employee future benefits 45 12
  Future income taxes 746 1,543
  17,511 19,025
Net change in non-cash working capital balances related to operations [note 12] 5,524 (486)
Cash provided by operating activities 23,035 18,539
 
INVESTING ACTIVITIES    
Pre-publication costs (7,002) (9,595)
Additions to capital assets (399) (263)
Cash used in investing activities (7,401) (9,858)
 
FINANCING ACTIVITIES    
Dividends paid to shareholders (7,118) (15,983)
Cash used in financing activities (7,118) (15,983)
 
Net increase (decrease) in cash during the year 8,516 (7,302)
Cash and cash equivalents, beginning of year 35,878 43,180
Cash and cash equivalents, end of year 44,394 35,878

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