McGraw-Hill Ryerson Limited
TSX : MHR

McGraw-Hill Ryerson Limited

October 28, 2011 16:00 ET

McGraw-Hill Ryerson Reports Third Quarter Results

WHITBY, ONTARIO--(Marketwire - Oct. 28, 2011) - McGraw-Hill Ryerson Limited (TSX:MHR) -

Attention: Business/Financial Editors

Three Months to September 30($000) 2011 2010
Sales revenue, less returns $34,319 $33,702
Other 1,545 1,043
Total revenue $35,864 $34,745
Net Income $7,759 $6,439
Net Income per share $3.89 $3.22
Nine Months to September 30($000)
Sales revenue, less returns $58,867 $57,541
Other 2,418 1,980
Total revenue $61,285 $59,521
Net Income $6,112 $4,239
Net Income per share $3.06 $2.12

Summary

Our revenues are typically more heavily weighted towards the second half of the calendar year leading up to beginning of the school season. In the third quarter, McGraw-Hill Ryerson's revenues generally exceed the total of the first two quarters combined. Sales and net income in the third quarter this year were above that of prior year's third quarter.

Three Months Ended September 30, 2011

Total revenue for the third quarter increased by 1.8% to $35.9 million in 2011 compared to $34.7 million in 2010, driven by an increase in sales in the School Division.

The Higher Education Division sales remained consistent with a slight increase of $0.4 million over the third quarter of 2010 to $24.5 million, as a result of increased Canadian product sales. Digital and custom products continue to be a growth area for this Division.

The School Division sales increased 4.7% to $8.1 million in the third quarter of 2011, from $7.7 million in the corresponding quarter of 2010. This increase was mainly driven by orders placed by the Western provinces.

In the Professional Division, sales decreased by $0.1 million in the third quarter of 2011 to $1.8 million, from $1.9 million in the comparative period of the prior year.

Other Revenue, representing billed freight, copyright licensing, translation fees, sales commission for U.S. digital products and rental revenue from the tenant at the Company's Whitby, Ontario facility increased in the third quarter of 2011 compared to the third quarter of 2010 as a result of the timing of payments of copyright revenue.

Income before tax was $10.9 million compared to $9.5 million in the third quarter last year. This variance was mainly the result of higher revenue.

Nine Months Ended September 30, 2011

Total revenue for the first nine months increased by 3.0% to $61.3 million in 2011 compared to $59.5 million in 2010, driven by an increase in sales in the School Division.

The Higher Education Division sales decreased slightly by $0.6 million to $36.4 million compared to the first nine months of 2010. Increased competition from used and rental textbooks is causing a decrease in imported product sales. Digital and custom products continue to be a growth area for this Division.

The School Division sales increased 15.2% to $18.2 million in the first nine months of 2011, from $15.8 million in the corresponding period of 2010. This increase was mainly driven by increased ordering from the Western provinces.

In the Professional Division, sales decreased by $0.6 million in the first nine months of 2011 to $4.2 million, from $4.8 million in the comparative period of the prior year. This decrease was caused by reduced orders from retailers.

Other Revenue, representing billed freight, copyright licensing, translation fees, sales commission for U.S. digital products and rental revenue from the tenant at the Company's Whitby, Ontario facility increased in the first nine months of 2011 compared to the first nine months of 2010. The increase is the result of timing of payments for copyright licensing.

Year to date income before tax was $8.8 million, compared to $6.4 million for the same period last year. This increase in income was mainly caused by the sales increase.

Notice to Reader

The attached financial statements have been prepared by management of McGraw-Hill Ryerson Limited. The financial statements for the three and nine month periods ended September 30, 2011 and 2010 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 2010 was $81 million. Additional information is available at http://www.mcgrawhill.ca.

STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
[in thousands of dollars except per share data]
(unaudited)
Three months ended Nine months ended
September 30 September 30
2011 2010 2011 2010
$ $ $ $
Sales revenue, less returns 34,319 33,702 58,867 57,541
Other income 1,393 892 1,969 1,547
Rental income 152 151 449 433
Total revenue 35,864 34,745 61,285 59,521
Cost of goods sold 12,995 13,195 21,312 22,304
Gross profit 22,869 21,550 39,973 37,217
Operating expenses 7,852 7,764 23,347 23,474
Amortization – pre-publication costs 3,838 4,081 7,217 6,558
Depreciation – property, plant and equipment 237 243 711 719
Operating income 10,942 9,462 8,698 6,466
Finance income 46 41 266 105
Finance costs 22 30 78 101
Foreign exchange gain (loss) (103 ) (8 ) (91 ) (76 )
Income before income taxes 10,863 9,465 8,795 6,394
Income tax expense 3,104 3,026 2,683 2,155
Net income and comprehensive
income for the period
attributable to equity holders of
the Company 7,759 6,439 6,112 4,239
Earnings per share
Basic and diluted $3.89 $3.22 $3.06 $2.12
STATEMENTS OF FINANCIAL POSITION
[in thousands of dollars]
(unaudited)
As at September 30, December 31, September 30,
2011 2010 2010
$ $ $
ASSETS
Current
Cash and cash equivalents 31,721 44,394 30,189
Marketable securities 681 832 786
Trade and other receivables, net 17,651 9,273 17,262
Inventories, net 6,081 5,370 6,724
Due from parent and affiliated companies 2,639 1,403 1,556
Income taxes receivable 890
Prepaid expenses and other assets 329 291 286
Total current assets 59,102 61,563 57,693
Property, plant and equipment, net 14,197 14,630 14,725
Intangible assets 15,475 18,205 17,126
Deferred tax assets 735 812 965
Total non-current assets 30,407 33,647 32,816
89,509 95,210 90,509
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 10,033 9,949 9,337
Income taxes payable 609 6
Due to parent and affiliated companies 4,025 4,675 3,846
Total current liabilities 14,667 14,630 13,183
Employee future benefits 2,415 2,588 2,582
Long-term payable 133 391
Total liabilities 17,215 17,609 15,765
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 613 372 258
Retained earnings 69,684 75,232 72,489
Total equity 72,294 77,601 74,744
89,509 95,210 90,509
STATEMENTS OF CHANGES IN EQUITY
[in thousands of dollars]
(unaudited)
Share Paid in Retained
capital Capital earnings Total
$ $ $ $
Balance, January 1, 2010 1,997 104 74,829 76,930
Dividends paid ($3.295 per share) (6,579 ) (6,579 )
Additional paid-in capital 154 154
Net income and comprehensive income attributable to equity holders of the Company 4,239 4,239
Balance, September 30, 2010 1,997 258 72,489 74,744
Balance, December 31, 2010 1,997 372 75,232 77,601
Dividends paid ($5.840 per share) (11,660 ) (11,660 )
Additional paid-in capital 241 241
Net income and comprehensive income attributable to equity holders of the Company 6,112 6,112
Balance, September 30, 2011 1,997 613 69,684 72,294
STATEMENTS OF CASH FLOWS
[in thousands of dollars]
(unaudited)
Nine months ended September 30
2011 2010
$ $
Operating activities
Net income for the period 6,112 4,239
Add (deduct) charges not affecting cash:
Amortization – pre-publication costs 7,217 6,558
Depreciation – property, plant and equipment 711 719
Decrease in long-term payable (258 )
Employee future benefits (173 ) 27
Deferred taxes 77 (270 )
Net change in non-cash working capital balances related to operations (10,304 ) (5,795 )
Cash provided by operating activities 3,382 5,478
Investing activities
Investment in pre-publication costs (4,509 ) (4,515 )
Investment in property, plant and equipment (278 ) (262 )
Decrease in financial instruments 151 35
Cash used in investing activities (4,636 ) (4,742 )
Financing activities
Dividends paid to shareholders (11,660 ) (6,579 )
Change in paid-in capital 241 154
Cash used in financing activities (11,419 ) (6,425 )
Net decrease in cash and cash equivalents (12,673 ) (5,689 )
Cash and cash equivalents, beginning of period 44,394 35,878
Cash and cash equivalents, end of period 31,721 30,189
Supplemental cash flow information
Income taxes refunded 157 2,540
Income taxes paid 2,143 2,709

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