McGraw-Hill Ryerson Limited
TSX : MHR

McGraw-Hill Ryerson Limited

July 29, 2005 16:00 ET

McGraw-Hill Ryerson Reports Second Quarter Results

WHITBY, ONTARIO--(CCNMatthews - July 29, 2005) - McGraw-Hill Ryerson Limited (TSX:MHR) -



Three Months to June 30, 2005 ($000) This Year Year Ago
------------------------------
Sales, less returns $17,002 $16,181
Other 412 394
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Total revenue $17,414 $16,575

Net Income 719 153
Net Income per share $ 0.36 $ 0.08

Six Months to June 30, 2005 ($000)
---------------------------
Sales, less returns $25,238 $26,616
Other 771 704
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Total revenue $26,009 $27,320

Net Loss (2,040) (1,665)
Net Loss per share $ (1.02) $ (0.83)


Summary

Our revenues are typically more heavily weighted towards the second half of the year while expenses are more evenly distributed across the year. Historically, this combination usually results in a net loss in the first quarter, and a modest profit in the second quarter of each year. 2005 is no exception.

Three Months Ended June 30, 2005

Quarterly revenue of $17.4 million represents a 5.1% increase compared to the prior year, as a result of sales increases in Higher Education division and Trade, Professional, and Medical division with a slight decrease in the School division for the quarter.

The Higher Education Division reported sales of $7.8 million which is a slight increase over the prior year's $7.5 million.

School Division reported sales of $6.7 million, a 2.6% decrease from 2004. This decrease was expected in light of market conditions.

Trade, Professional, and Medical sales increased by $0.7 million to $2.3 million because of orders received for "Back to School" promotions. These orders were received in the second quarter in 2005 compared to the third quarter last year.

Operating expenses, comprising cost of product and royalties, increased to $6.9 million from $6.6 million in the prior year. This is a direct result of the revenue increase discussed above. Editorial, selling, general and administrative expenses decreased 1.4% to $7.6 million from $7.7 million in the second quarter last year. This decrease is a result of the Company's focused effort on improving processes.

Amortization expense has decreased 17.1% because of a decrease in plant amortization. The School division has reduced its pre-publication spending over the past two years in response to reduced high school curriculum reform in several provinces.

Income before tax is $1.2 million compared to $0.3 million in the second quarter last year. This was the result of the sales increase and the overall expenses remaining consistent.

Six Months Ended June 30, 2005

Total revenue of $26.0 million decreased by 4.8% compared to the prior year. This decrease is the combination of a decrease in the School division offset by an increase in the Trade, Professional, and Medical division.

The Higher Education division sales of $11.4 million remained consistent with sales of $11.4 million in the first half of 2004.

School division sales decreased 16.1% to $9.3 million. A decrease was expected in view of the current emphasis on spending in the Elementary market, where the company has minimal product offerings.

Trade, Professional, and Medical sales increased by $0.5 million to $4.2 million, as a result of large "Back to School" orders received earlier in the year compared with 2004.

Operating expenses, comprised of cost of product and royalties, have remained consistent at $11.2 million as revenue has remained fairly stable. Margins have decreased slightly as a result of the product mix sold in the first half of this year compared to last year.

For the first half of the year, editorial, selling, general and administrative expenses have decreased 2.7% from the prior year. This decrease reflects the Company's focus on productivity improvements that have resulted in cost savings across many areas.

Total amortization expense decreased 16.8%, caused by a decrease in pre-publication amortization. This is a result of the decrease in investment in the Canadian publishing program in the School Division as a result of reduced high school curriculum reform in several provinces. Amortization of capital assets has decreased 13.9% in 2005 due to reduced capital investments over the past few years.

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 reported a $0.2 million loss at the end of the second quarter. This compares with a $0.1 million loss in the prior year. The Company continues to employ policies to minimize the impact of currency fluctuations.

Year to date loss before tax is $3.3 million, compared to $2.9 million last year. The majority of this increased loss is caused by the $1.4 million decrease in sales compared to the prior year.

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

The comparative quarterly information has been reclassified from statements previously presented to conform to the presentation of the 2005 quarterly information.



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 periods ended June 30, 2005 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. Revenue in 2004 was
$88 million. Additional information is available at
http://www.mcgrawhill.ca.


McGRAW-HILL RYERSON LIMITED

BALANCE SHEETS
(unaudited)

(In thousands of dollars)
As of June 30, December 31, June 30,
2005 2004 2004
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ASSETS
Current
Cash and cash equivalents $11,320 $21,496 $ 8,269
Accounts receivable 10,678 17,231 13,364
Due from affiliated companies 4,415 2,776 6,866
Inventories 13,550 11,543 13,844
Prepaid expenses and other assets 952 328 1,358
Income taxes recoverable 4,690 - 4,090
Future tax assets 1,250 2,411 1,181
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Total current assets 46,855 55,785 48,972
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Capital assets, net 19,188 19,733 20,019
Other assets, net 11,797 11,854 13,403
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Total assets $77,840 $87,372 $82,394

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LIABILITIES & SHAREHOLDERS' EQUITY
Current
Accounts payable and
accrued charges $6,999 $ 7,409 $ 10,764
Income taxes payable - 453 -
Due to affiliated companies 2,719 8,735 8,326
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Total current liabilities 9,718 16,597 19,090
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Future tax liabilities 1,078 942 1,440
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Total liabilities 10,796 17,539 20,530
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Shareholders' Equity
Share capital
Authorized - 5,000,000 common shares
Issued and outstanding -
1,996,638 common shares 1,997 1,997 1,997
Retained earnings 65,047 67,836 59,867
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Total shareholders' equity 67,044 69,833 61,864
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Total liabilities and
shareholders' equity $77,840 $87,372 $82,394
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McGRAW-HILL RYERSON LIMITED

STATEMENTS OF INCOME/(LOSS) AND RETAINED EARNINGS
(unaudited)
(In thousands of dollars except per share data)

Three months ended Six months ended
June 30 June 30
2005 2004 2005 2004
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(restated- (restated-
Note 1) Note 1)
Revenue
Sales less returns $17,002 $ 16,181 $25,238 $ 26,616
Other 412 394 771 704
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Total revenue 17,414 16,575 26,009 27,320
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Expenses
Operating 6,942 6,559 11,166 11,250
Editorial, selling,
general, and
administrative 7,622 7,731 15,148 15,565
Amortization 1,640 1,979 2,747 3,300
Exchange (gain) loss 38 (24) 228 111
Interest - 6 - 7
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Total operating expenses 16,242 16,251 29,289 30,233
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Income/(loss) before
income taxes 1,172 324 (3,280) (2,913)
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Provision for/(recovery
of) income taxes
Current 152 80 (2,642) (2,494)
Future 301 91 1,402 1,246
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453 171 (1,240) (1,248)
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Net income/(loss) for the
period $ 719 $ 153 $(2,040) $(1,665)


Retained earnings,
beginning of period $64,718 $ 60,074 $67,836 $ 62,221
Dividends paid to
shareholders to date
(2005 - $0.375 per share;
2004 - $0.345 per share) (390) (360) (749) (689)

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Retained earnings, end of
period $65,047 $ 59,867 $65,047 $ 59,867
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Earnings (loss) per share

Basic $ 0.36 $ 0.08 $ (1.02) $ (0.83)

Diluted $ 0.36 $ 0.08 $ (1.02) $ (0.83)
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Weighted average number of shares for basic and diluted earnings
(loss) per share for 2005 and 2004 is 1,996,638.


McGRAW-HILL RYERSON LIMITED

STATEMENTS OF CASH FLOW
(unaudited)
(In thousands of dollars)

Three months ended Six months ended
June 30 June 30
2005 2004 2005 2004
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OPERATING ACTIVITIES
Net income/(loss) for the period $ 719 $ 153 $(2,040) $ (1,665)
Add/deduct non-cash items
Amortization 1,640 1,979 2,747 3,300
Future income taxes 320 91 1,297 1,246
Net change in non-cash working
capital (6,203) (2,968) (9,286) (12,841)
balances related to operations
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Cash used in operating
activities (3,524) (745) (7,282) (9,960)
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INVESTING ACTIVITIES
Prepublication costs (1,088) (1,172) (1,982) (2,365)
Additions to capital assets (145) (44) (163) (169)
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Cash used in investing activities (1,233) (1,216) (2,145) (2,534)
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FINANCING ACTIVITIES
Dividends paid to shareholders (390) (360) (749) (689)
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Cash used in financing activities (390) (360) (749) (689)
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Net decrease in cash during
period (5,147) (2,321) (10,176) (13,183)
Cash and cash equivalents,
beginning of period 16,467 10,590 21,496 21,452
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Cash and cash equivalents, end
of period 11,320 8,269 11,320 8,269
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Supplemental cash flow information
Interest paid $ - $ 1 $ - $ 7
Income taxes paid $1,406 $1,095 $2,502 $ 3,550
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Contact Information

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