McGraw-Hill Ryerson Limited
TSX : MHR

McGraw-Hill Ryerson Limited

October 28, 2005 09:00 ET

McGraw-Hill Ryerson Reports Third Quarter Results and Announces Retirement of John Dill, President and CEO

WHITBY, ONTARIO--(CCNMatthews - Oct. 28, 2005) - McGraw-Hill Ryerson Limited (TSX:MHR) -



Three Months to September 30, 2005 ($000) This Year Year Ago
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Sales, less returns $37,155 $37,779
Other 596 455
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Total revenue $37,751 $38,234

Net Income 6,317 6,124
Net Income per share $ 3.16 $ 3.07

Nine Months to September 30, 2005 ($000)
---------------------------------

Sales, less returns $62,393 $64,395
Other 1,367 1,159
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Total revenue $63,760 $65,554

Net Income 4,277 4,460
Net Income per share $ 2.14 $ 2.23


Summary

In the third quarter of each year McGraw-Hill Ryerson's revenues exceed the total of the first two quarters combined. This trend continued in 2005, with the Company reporting revenue down slightly from prior year, but improved bottom line results.

Three Months Ended September 30, 2005

Total revenue of $37.7 million was a 1.3% decrease compared to prior year. Increased sales in Higher Education were offset by lower results in the School Division and Trade, Professional and Medical.

The Higher Education Division reported sales of $26.1 million which is a 4.0% increase compared to prior year's $25.1 million. This increase is the result of a successful sales quarter for our Business and Economics titles.

School Division reported sales of $8.3 million, a 13.5% decrease from 2004. This decrease was expected, and is caused by a stronger emphasis in several provinces on Kindergarten-Grade 8 core subjects, where McGraw-Hill Ryerson has few product offerings.

Trade, Professional, and Medical sales of $2.4 million is lower than prior year by $0.2 million, caused by several customers placing large orders in the second quarter this year, as compared to the third quarter in the prior year.

Operating expenses, comprised of cost of product and royalties decreased 4.6% to $17.0 million from $17.9 million in the prior year. This is a result of the revenue decrease discussed above as well as the product mix being sold.

Editorial, selling, general and administrative expenses decreased 5.8% to $7.5 million from $8.0 million in the third quarter last year. The decrease is the result of strong expense controls throughout the Company as well as increased income from our distribution contract with Cheneliere/McGraw-Hill.

Income before tax is $10.1 million compared to $9.5 million in the third quarter last year, mainly the result of lower expenses in the current year.

Nine Months Ended September 30, 2005

Total revenue of $63.8 million is a 2.7% decrease compared to prior year.

The Higher Education division sales of $37.5 million exceeded prior year sales by 2.5%. The improvement is the result of increased sales in the Business and Economics subject areas.

School division sales decreased 14.9% to $17.7 million. A larger proportion of industry-wide spending is now focused on the elementary market where the Company has minimal product offerings.

Trade, Professional, and Medical sales increased by $0.3 million to $6.6 million, as a result of strong sales results for several Medical titles.

Operating expenses, comprised of cost of product and royalties, have decreased 3.1% to $28.2 million which is consistent with the decrease in revenue. Margins have remained consistent with the prior year's results.

For the first nine months of the year, editorial, selling, general and administrative expenses have decreased 3.8% from the prior year. This decrease reflects strong results from the Company's distribution contract with Cheneliere/McGraw-Hill as well as the Company's focus on productivity and process improvements.

Year to date income before tax is $6.8 million, compared to $6.6 million last year. The majority of this increase is caused by the reduction in editorial, selling, general and administrative expenses.

Other News

McGraw-Hill Ryerson's Board of Directors also announced that John D. Dill, 63, president and CEO, will retire from his position effective Dec. 31, 2005. "John's leadership and achievements have contributed to McGraw-Hill Ryerson's significant growth in the last decade," said H. Ian Macdonald, chairman of McGraw-Hill Ryerson's board. "McGraw-Hill Ryerson will continue to build on its solid performance by developing the exceptional products and services that meet the growing information needs of the Canadian marketplace." Dill joined McGraw-Hill Ryerson in 1993 after seven years as president of John Wiley & Sons Canada. Prior to Wiley, he was at Holt, Rinehart and Winston of Canada where he was president of the School Division and vice president of the College Division. A committee appointed by the board is conducting a search for Dill's successor.

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.

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



McGRAW-HILL RYERSON LIMITED
BALANCE SHEETS
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(In thousands of dollars)
As of September December September
(unaudited) 30, 2005 31, 2004 30, 2004
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ASSETS
Current
Cash and cash equivalents $ 15,507 $ 21,496 $ 10,486
Accounts receivable 27,598 17,231 26,358
Due from affiliated companies 1,999 2,776 2,942
Inventories 10,531 11,543 13,109
Prepaid expenses and other assets 632 328 488
Income taxes recoverable 138 - -
Future tax assets 2,485 2,411 2,505
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Total current assets 58,890 55,785 55,888

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Capital assets, net 18,914 19,733 19,874
Other assets, net 10,062 11,854 12,126

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Total assets $ 87,866 $ 87,372 $ 87,888

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LIABILITIES & SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued charges $ 7,140 $ 7,409 $ 7,083
Income taxes payable - 453 93
Due to affiliated companies 7,290 8,735 12,173

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Total current liabilities 14,430 16,597 19,349

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Future tax liabilities 464 942 909

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Total liabilities 14,894 17,539 20,258

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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 70,975 67,836 65,633

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Total shareholders' equity 72,972 69,833 67,630

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Total liabilities and shareholders'
equity $ 87,866 $ 87,372 $ 87,888

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McGRAW-HILL RYERSON LIMITED

STATEMENTS OF INCOME AND RETAINED EARNINGS
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(unaudited)

(In thousands of dollars except per share data)

Three months ended Nine months ended
September 30 September 30
2005 2004 2005 2004
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Revenue
Sales, less returns $ 37,155 $ 37,779 $ 62,393 $ 64,395
Other 596 455 1,367 1,159

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Total revenue 37,751 38,234 63,760 65,554

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Expenses
Operating 17,038 17,856 28,204 29,104
Editorial, selling, general,
and administrative 7,525 7,991 22,673 23,556
Amortization 3,334 3,196 6,081 6,496
Exchange (gain)/loss (199) (305) 29 (194)
Interest - - - 7

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Total operating expenses 27,698 28,738 56,987 58,969

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Income before income taxes 10,053 9,496 6,773 6,585

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Provision for/(recovery of)
income taxes
Current 5,586 5,227 2,944 2,734
Future (1,850) (1,855) (448) (609)

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3,736 3,372 2,496 2,125

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Net income for the period $ 6,317 $ 6,124 $ 4,277 $ 4,460

Retained earnings, beginning
of period $ 65,047 $ 59,868 $ 67,836 $ 62,221
Dividends declared to
shareholders to date
($0.57 per share; 2004
- $0.525 per share) (389) (359) (1,138) (1,048)

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Retained earnings, end
of period $ 70,975 $ 65,633 $ 70,975 $ 65,633

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Earnings per share

Basic $ 3.16 $ 3.07 $ 2.14 $ 2.23

Diluted $ 3.16 $ 3.07 $ 2.14 $ 2.23

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Weighted average number of shares for basic and diluted earnings 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 Nine months ended
September 30 September 30
2005 2004 2005 2004
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OPERATING ACTIVITIES
Net income for the period $ 6,317 $ 6,124 $ 4,277 $ 4,460
Add/deduct charges to
income not affecting cash:
Amortization 3,334 3,196 6,081 6,496
Future income taxes (1,849) (1,855) (552) (609)
Net change in non-cash
working capital
balances related to
operations (1,901) (3,116) (11,187) (15,958)

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Cash provided by (used in)
operating activities 5,901 4,349 (1,381) (5,611)

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INVESTING ACTIVITIES
Prepublication costs (1,250) (1,525) (3,232) (3,890)
Capital assets (75) (248) (238) (417)

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Cash used in investing
activities (1,325) (1,773) (3,470) (4,307)

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FINANCING ACTIVITIES
Dividends paid to
shareholders (389) (359) (1,138) (1,048)

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Cash used in financing
activities (389) (359) (1,138) (1,048)

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Net increase/(decrease) in
cash during period 4,187 22,21 (5,989) (10,966)
Cash and cash equivalents,
beginning of period 11,320 8,269 21,496 21,452

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Cash and cash equivalents,
end of period 15,507 10,486 15,507 10,486

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Supplemental cash flow
information
Interest paid $ - $ - $ - $ 7
Income taxes refund $ (87) $ - $ (87) $ -
Income taxes paid $ 994 $ 1,096 $ 3,496 $ 4,646

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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