McGraw-Hill Ryerson Limited
TSX : MHR

McGraw-Hill Ryerson Limited

July 27, 2012 16:00 ET

McGraw-Hill Ryerson Reports Second Quarter Results

WHITBY, ONTARIO--(Marketwire - July 27, 2012) - McGraw-Hill Ryerson Limited (TSX:MHR) -

Attention: Business/Financial Editors -

Three Months to June 30 ($000)
(unaudited)
2012 2011
Sales revenue, less returns $ 14,391 $ 16,182
Other income 467 399
Rental income 116 146
Total Revenue $ 14,974 $ 16,727
Net income $
210
$
545
Net income per share $ 0.11 $ 0.27
Six Months to June 30 ($000)
(unaudited)
2012 2011
Sales revenue, less returns $ 22,084 $ 24,548
Other income 594 576
Rental income 231 297
Total Revenue $ 22,909 $ 25,421
Net loss $ (2,534 ) $ (1,647 )
Net loss per share $ ( 1.27 ) $ ( 0.82 )

Summary

The Company generally reports a modest net income for the second quarter of the year as sales are more heavily weighted to the second half. For the second quarter in 2012, net income is $0.2 million compared to $0.5 million in the second quarter of last year as a result of lower sales. As expenses are more evenly distributed over the course of the year, the Company generally reports a net loss in the first half of each year. For the first half of 2012, the net loss is $2.5 million compared to a net loss of $1.6 million in the first half of 2011.

Three Months Ended June 30, 2012

Total revenue for the second quarter decreased by 10.5% to $15.0 million in 2012 compared to $16.7 million in 2011.

The Higher Education Division sales decreased by $0.9 million in the second quarter of 2012 to $6.9 million. Despite the decline, digital and custom products continue to be a growth area for this Division.

The School Division sales decreased $0.8 million to $6.3 million in the second quarter of 2012 from $7.1 million in the corresponding quarter of 2011. This decrease was mainly driven by nonrecurring orders placed in 2011 by the Atlantic and Western provinces.

In the Professional Division, sales decreased by $0.1 million in the second quarter of 2012 to $1.2 million.

Cost of goods sold decreased to $4.9 million from $5.5 million last year. The decrease of 11.5% is consistent with the decrease in sales.

Income before taxes was $0.4 million compared to $0.8 million in the second quarter last year, mainly the result of the decrease in sales.

Six Months Ended June 30, 2012

Total revenue for the first six months decreased by 10.0% to $22.9 million in 2012 compared to $25.4 million in 2011.

The Higher Education Division sales decreased $1.0 million compared to the first half of 2011 to $10.9 million. This decrease is mostly the result of customers delaying orders until closer to the beginning of the school year. Digital and custom products continue to be a growth area for this Division.

The School Division sales decreased 12.0% to $9.0 million in the first half of 2012 from $10.2 million in the corresponding quarter of 2011. This decrease was mainly driven by nonrecurring orders placed in 2011 by the Atlantic and Western provinces.

In the Professional Division, sales decreased by $0.1 million in the first half of 2012 to $2.3 million, from $2.4 million in the comparative period of the prior year. This decrease was caused in part by reduced orders and increased returns from retailers and distributors. Sales of print products have migrated to e-book offerings where the channel is still being developed and average unit revenues are lower.

Cost of goods sold decreased to $7.5 million from $8.3 million for the first six months of 2011.

Operating expenses increased slightly to $15.7 million during the first half of 2012 compared to $15.5 million in the comparative period of the prior year as a result of one-time legal fees.

Year to date loss before taxes was $3.2 million compared to $2.1 million in the first half of last year. The variance was mainly a reflection of the decrease in sales.

Notice to Reader

The attached financial statements have been prepared by management of McGraw-Hill Ryerson Limited. The financial statements for the three and six month period ended June 30, 2012 and June 30, 2011 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 2011 was $82 million. Additional information is available at www.mcgrawhill.ca.

McGraw-Hill Ryerson Limited
STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
[in thousands of dollars except per share data]
(unaudited)
Three months ended
June 30
Six months ended
June 30
2012 2011 2012 2011
$ $ $ $
Sales revenue, less returns 14,391 16,182 22,084 24,548
Other income 467 399 594 576
Rental income 116 146 231 297
Total revenue 14,974 16,727 22,909 25,421
Cost of goods sold 4,864 5,494 7,522 8,317
Gross profit 10,110 11,233 15,387 17,104
Operating expenses 7,771 7,836 15,738 15,495
Amortization - pre-publication costs 1,912 2,349 2,739 3,379
Depreciation - property, plant and equipment 210 239 426 474
Operating income (loss) 217 809 (3,516 ) (2,244 )
Finance income 82 89 189 220
Finance costs 30 28 66 56
Foreign exchange gain (loss) 121 (57 ) 174 12
Income (loss) before income taxes 390 813 (3,219 ) (2,068 )
Income tax expense (recovery) 180 268 (685 ) (421 )
Net income (loss) and comprehensive income (loss) for the period attributable to equity holders of the Company 210 545 (2,534 ) (1,647 )
Income (loss) per share
Basic and diluted $ 0.11 $ 0.27 $ (1.27 ) $ (0.82 )
McGraw-Hill Ryerson Limited
STATEMENTS OF FINANCIAL POSITION
[in thousands of dollars]
(unaudited)
As at June 30, December 31, June 30,
2012 2011 2011
$ $ $
ASSETS
Current
Cash and cash equivalents 12,904 41,926 18,585
Marketable securities 746 716 790
Trade and other receivables, net 9,526 11,429 9,338
Inventories, net 8,259 6,123 8,124
Due from parent and affiliated companies 4,140 1,925 6,585
Income taxes receivable 3,590 - 3,155
Prepaid expenses and other assets 876 280 886
Total current assets 40,041 62,399 47,463
Property, plant and equipment, net 13,673 14,071 14,454
Intangible assets 16,184 16,439 17,435
Deferred tax assets - 494 -
Total non-current assets 29,857 31,004 31,889
69,898 93,403 79,352
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 8,690 11,122 9,465
Income taxes payable - 713 -
Due to parent and affiliated companies 950 4,784 1,698
Total current liabilities 9,640 16,619 11,163
Employee future benefits 2,416 2,281 2,474
Long-term payable - 44 197
Deferred tax liabilities 876 - 503
Total liabilities 12,932 18,944 14,337
Equity
Issued 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 888 702 524
Retained earnings 54,081 71,760 62,494
Total equity 56,966 74,459 65,015
69,898 93,403 79,352


McGraw-Hill Ryerson Limited
STATEMENTS OF CHANGES IN EQUITY
[in thousands of dollars]
(unaudited)
Share
capital
Paid-in
capital
Retained
earnings
Total
$ $ $ $
Balance, December 31, 2010 1,997 372 75,232 77,601
Dividends paid ($5.555 per share) - - (11,091 ) (11,091 )
Additional paid-in capital - 152 - 152
Net loss and comprehensive loss attributable to equity holders of the Company - - (1,647 ) (1,647 )
Balance, June 30, 2011 1,997 524 62,494 65,015
Balance, December 31, 2011 1,997 702 71,760 74,459
Dividends paid ($7.585 per share) - - (15,145 ) (15,145 )
Additional paid-in capital - 186 - 186
Net loss and comprehensive loss attributable to equity holders of the Company - - (2,534 ) (2,534 )
Balance, June 30, 2012 1,997 888 54,081 56,966


McGraw-Hill Ryerson Limited
STATEMENTS OF CASH FLOWS
[in thousands of dollars]
(unaudited)
Six months ended June 30
2012 2011
$ $
Operating activities
Net loss for the period (2,534 ) (1,647 )
Add (deduct) charges not affecting cash:
Amortization - pre-publication costs 2,739 3,379
Depreciation - property, plant and equipment 426 474
Decrease in long-term payable (44 ) (194 )
Employee future benefits 135 (114 )
Deferred taxes 1,370 1,315
Net change in non-cash working capital balances related to operations (13,599 ) (15,203 )
Cash used in operating activities (11,507 ) (11,990 )
Investing activities
Investment in pre-publication costs (2,498 ) (2,624 )
Investment in property, plant and equipment (28 ) (298 )
Decrease (increase) in marketable securities (30 ) 42
Cash used in investing activities (2,556 ) (2,880 )
Financing activities
Dividends paid to shareholders (15,145 ) (11,091 )
Change in paid-in capital 186 152
Cash used in financing activities (14,959 ) (10,939 )
Net decrease in cash and cash equivalents (29,022 ) (25,809 )
Cash and cash equivalents, beginning of period 41,926 44,394
Cash and cash equivalents, end of period 12,904 18,585

Contact Information

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