McGraw-Hill Ryerson Limited

TSX : MHR


McGraw-Hill Ryerson Limited

April 25, 2014 16:00 ET

McGraw-Hill Ryerson Reports First Quarter Results

WHITBY, ONTARIO--(Marketwired - April 25, 2014) - McGraw-Hill Ryerson Limited (TSX:MHR)

Attention: Business/Financial Editors

Three Months to March 31 ($000) 2014 2013
(unaudited)
Sales revenue, less returns $6,884 $7,387
Other income 233 302
Rental income 138 182
Total Revenue $7,255 $7,871
Net loss
($3,081)

($1,805)
Net loss per share ($ 1.54) ($ 0.90)

Summary

The first quarter is historically the quarter with the lowest sales of the fiscal year, as sales are heavily weighted towards the second half of the calendar year leading up to the beginning of the school season. As expenses are more evenly distributed over the course of the year, the Company generally reports a net loss in the first quarter of each year. For the first quarter in 2014, the net loss is $3.1 million, compared to a net loss of $1.8 million in the first quarter of 2013.

Revenue

Total revenue for the first quarter decreased by 7.8% to $7.3 million in 2014 compared to $7.9 million in the corresponding quarter of 2013.

The Higher Education Division sales remained consistent at $4.2 million in the first quarter of 2014 when compared to the first quarter of 2013.

The School Division sales decreased by $0.2 million to $2.0 million in the first quarter of 2014 from $2.2 million in the corresponding quarter of 2013 as a result of non-recurring adoptions in 2013 in Ontario and the Atlantic provinces.

In the Professional Division, sales decreased by $0.3 million in the first quarter of 2014 to $0.8 million due to a decrease in the wholesale market.

Other income, representing billed freight, copyright licensing, commission on foreign sales, and translation fees, decreased in the first quarter of 2014 by 22.8% to $0.2 million from $0.3 million in the corresponding quarter of 2013.

Rental income from the tenant at the Company's Whitby, Ontario facility decreased slightly to $0.1 million in the first quarter of 2014 compared to $0.2 million in the first quarter of 2013 as a result of the lower escalation charges to our tenant.

Expenses

Cost of goods sold decreased by $0.2 million to $2.5 million in the first quarter of 2014 from $2.7 million in the corresponding quarter of 2013 which is consistent with the lower revenues.

Operating expenses increased slightly for the first quarter to $6.5 million compared to $6.4 million for the same quarter in 2013. The increase is a result of increased professional fees.

Amortization expense for pre-publication costs decreased by $0.5 million to $0.3 million in the first quarter of 2014 from $0.8 million in the corresponding quarter of 2013. Depreciation expense for capital assets in the first quarter remained consistent at $0.2 million.

The Company has listed its building located in Whitby, Ontario for sale as of March 31, 2014. The asset has been recorded at market value and an impairment of the asset was recorded for $1.4 million.

Finance income increased $0.03 million as a result of higher cash balances in the first quarter of 2014 than in the first quarter of 2013. Finance costs, consisting mainly of banking charges, in the first quarter of 2014 remained consistent with the same quarter of 2013.

In the first quarter, the Company reported a foreign exchange loss of $0.2 million compared to a $0.1 million loss in the same period of 2013. The Company incurs foreign exchange gains and losses throughout the year as a result of the volume of related-party transactions, most of which are denominated in U.S. dollars. The Company continues to employ policies to minimize the impact of these currency fluctuations.

Net loss increased to $3.1 million from $1.6 million in the first quarter of 2013, mainly driven by the impairment on asset. Excluding the impact of impairment, net loss of $1.7 million is consistent with 2013.

Cash increased to $21.8 million as of March 31, 2014 from $10.2 million in 2013. This increase was generated from operations.

The Corporation and McGraw-Hill Global Education Holdings, LLC ("McGraw-Hill Education") announced on April 17, 2104 that they have entered into a definitive acquisition agreement pursuant to which McGraw-Hill Education will indirectly acquire all of the outstanding common shares of McGraw-Hill Ryerson that it does not already own at a price of C$50.00 cash per common share. Investmentaktiengesellschaft für langfristige Investoren TGV, owner of approximately 12.5% of the outstanding common shares of McGraw-Hill Ryerson, has separately entered into an agreement with McGraw-Hill Education to vote its shares in favour of the transaction at a special meeting of McGraw-Hill Ryerson shareholders to be held to approve the transaction.

The attached financial statements have been prepared by management of McGraw-Hill Ryerson Limited. The financial statements for the three month period ended March 31, 2014 and March 31, 2013 have not been reviewed by the auditors of McGraw-Hill Ryerson Limited.

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 2013 was $71 million. Additional information is available at http://www.mheducation.ca.

McGraw-Hill Ryerson Limited
Incorporated under the laws of Ontario
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(unaudited)
(In thousands of dollars―except per share data)
Three months ended March 31 2014 2013
Revenue
Sales revenue, less returns 6,884 7,387
Other income 233 302
Rental income 138 182
Total revenue 7,255 7,871
Cost of goods sold 2,495 2,668
Gross profit 4,760 5,203
Operating expenses 6,505 6,442
Amortization, net of impairment-pre-publication costs 330 806
Depreciation-property, plant and equipment 189 201
Impairment loss on assets 1,415 -
Operating loss (3,679) (2,246)
Finance income 72 37
Finance costs (46) (40)
Foreign exchange loss (168) (71)
Loss before income taxes (3,821) (2,320)
Income tax recovery (740) (515)
Net loss for the period attributable to equity holders of the Company
(3,081)

(1,805)
Other comprehensive income (loss)
Actuarial gain (loss) on employee future benefits, net of tax - 191
Total comprehensive loss for the period attributable to equity holders of the Company
(3,081)

(1,614)
Loss per share
Basic and diluted ($1.54) ($0.90)
McGraw-Hill Ryerson Limited
STATEMENTS OF FINANCIAL POSITION
(unaudited)
(In thousands of dollars)
As at March 31,
2014
December 31,
2013
March 31, 2013
Assets
Current
Cash 21,789 26,370 10,235
Marketable securities 1,052 998 859
Trade and other receivables, net 1,285 8,976 2,798
Inventories, net 5,550 3,312 6,913
Due from parent and affiliated companies 624 559 1,088
Prepaid expenses and other assets 590 401 917
Assets available for sale 10,750 - -
Income taxes receivable 2,517 293 2,011
Total current assets 44,157 40,909 24,821
Property, plant and equipment, net 414 12,757 13,266
Intangible assets 11,491 11,118 13,683
Deferred tax assets, net 314 1,013 -
Total non-current assets 12,219 24,858 26,949
Total assets 56,376 65,797 51,770
Liabilities and Equity
Current
Trade and other payables 8,262 10,817 7,808
Realignment payable 1,264 1,776 -
Due to parent and affiliated companies 1,070 3,709 645
Total current liabilities 10,596 16,302 8,453
Employee future benefits 1,925 1,894 2,547
Long-term payable 930 1,003 -
Deferred tax liabilities - - 430
Total non-current liabilities 2,855 2,897 2,977
Total liabilities 13,451 19,199 11,430
Equity
Share Capital
Authorized 5,000,000 no par value common shares
Issued and outstanding 1,996,638 common shares 1,997 1,997 1,997
Paid in capital 1,356 1,319 1,265
Accumulated other comprehensive income (loss) 346 346 (122)
Retained earnings 39,226 42,936 37,200
Total equity 42,925 46,598 40,340
Total liabilities and equity 56,376 65,797 51,770
McGraw-Hill Ryerson Limited
STATEMENTS OF CHANGES IN EQUITY
(unaudited)
(In thousands of dollars)
Share capital Paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total
Balance, December 31, 2012 1,997 1,081 (122) 39,603 42,559
Dividends paid ($0.30 per share) - - - (598) (598)
Additional paid-in capital - 184 - - 184
Net loss - - - (1,805) (1,805)
Balance, March 31, 2013 1,997 1,265 (122) 37,200 40,340
Balance, December 31, 2013 1,997 1,319 346 42,936 46,598
Dividends paid ($0.315 per share) - - - (629) (629)
Additional paid-in capital - 37 - - 37
Net Income - - - (3,081) (3,081)
Balance, March 31, 2014 1,997 1,356 346 39,226 42,925
McGraw-Hill Ryerson Limited
STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands of dollars)
Three months ended March 31 2014 2013
Operating Activities
Net loss for the period (3,081) (1,805)
Add (deduct) non-cash items
Amortization, net of impairment-pre-publication costs 330 806
Depreciation-property, plant and equipment 189 201
Impairment loss on assets 1,415 -
Decrease in long-term payable (73) (350)
Increase in employee future benefits 30 30
Deferred taxes 699 1,161
(491) 43
Net change in non-cash working capital balances related to operations (2,724) (3,695)
Cash used by operating activities (3,215) (3,652)
Investing Activities
Investment in pre-publication costs (709) (741)
Investment in property, plant and equipment (11) (44)
Increase in marketable securities (54) (60)
Cash used in investing activities (774) (845)
Financing Activities
Dividends paid to shareholders (629) (598)
Change in paid-in capital 37 184
Cash used in financing activities (592) (414)
Net decrease in cash during the period (4,581) (4,911)
Cash, beginning of period 26,370 15,146
Cash, end of period 21,789 10,235

Contact Information

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