McGraw-Hill Ryerson Limited
TSX : MHR

McGraw-Hill Ryerson Limited

November 10, 2006 16:00 ET

McGraw-Hill Ryerson Reports Third Quarter Results

WHITBY, ONTARIO--(CCNMatthews - Nov. 10, 2006) - McGraw-Hill Ryerson Limited (TSX:MHR) -

Attention: Business/Financial Editors



Three Months to September 30, 2006 ($000) This Year Year Ago
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Sales, less returns $37,026 $37,155
Other 546 596
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Total revenue $37,572 $37,751

Net Income 5,923 6,317
Net Income per share $ 2.97 $ 3.16


Nine Months to September 30, 2006 ($000)
---------------------------------

Sales, less returns $66,859 $62,393
Other 1,487 1,367
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Total revenue $68,346 $63,760

Net Income 4,656 4,277
Net Income per share $ 2.33 2.14


Summary

Our revenues are typically more heavily weighted towards the second half of the calendar year. In the third quarter McGraw-Hill Ryerson's revenues exceed the total of the first two quarters combined. This year's sales in the third quarter are consistent with the prior year.

Three Months Ended September 30, 2006

Total revenue of $37.6 million ($37.8 million in the prior year) is a result of an increase in Professional Division sales for the quarter and an offsetting decrease in School Division sales.

The Higher Education Division reported sales of $26.0 million, virtually unchanged from the prior year's $26.1 million.

The School Division reported sales of $7.4 million, a 10.5% decrease from the $8.3 million reported in 2005. This was caused by government funding in Ontario and British Columbia occurring earlier in the year in 2006.

The Professional Division sales of $2.8 million represent an increase of 16.3% over the prior year's $2.4 million in the third quarter as a result of improved sales across several titles, mainly in Business, Languages and General Reference.

Editorial, selling, general and administrative expenses increased 14.4% to $8.6 million from $7.5 million in the third quarter last year. These additional expenses were expected and are mainly the result of two factors: 1) costs to support the expanding publishing program in the School Division, and 2) the discontinuation of the Company's warehousing contract with DLC at the end of 2005, which had offset expenses in the prior year.

Income before tax is $9.5 million compared to income before tax of $10.1 million in the third quarter last year. This was mainly the result of the increase in expenses as discussed above.

Nine Months Ended September 30, 2005

All divisions are reporting increased sales over the prior year. Total revenue of $68.3 million increased by 7.2% compared to the prior year revenue of $63.8 million.

The Higher Education Division sales of $38.0 million are an increase of 1.2% over the $37.5 million in 2005. This increase is mainly from strong sales results for several Science, Engineering and Math titles.

School Division sales increased 13.4% to $20.0 million, compared to $17.6 million in 2005. This increase was caused by additional one-time funding by the Ontario and British Columbia governments to purchase textbooks during the first quarter of 2006.

Professional Division sales increased by 12.7% to $7.5 million. This division is reporting improved sales and return results across all national accounts.

Operating expenses, comprised of cost of product and royalties, have increased by 5.3% to $29.7 million. This is consistent with the sales increase. Margins, defined as sales less returns, less operating expenses, have improved slightly from the prior year (55.6% vs 54.8% in 2005).

For the first nine months of the year, editorial, selling, general and administrative expenses have increased 11.6% over the prior year. These additional expenses were expected and are mainly the result of two factors: 1) costs to support the expanding publishing program in the School Division, and 2) the discontinuation of the Company's warehousing contract with DLC at the end of 2005, which had offset expenses in the prior year.

Year-to-date income before tax is $7.5 million, compared to $6.8 million last year. The majority of this increased income is driven by the increase in sales compared to the prior year.

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 2005 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.



BALANCE SHEETS
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(In thousands of dollars)
As of September 30, December 31, September 30,
(unaudited) 2006 2005 2005
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ASSETS
Current
Cash and cash equivalents $21,230 $27,206 15,507
Accounts receivable 26,624 17,503 27,598
Due from parent and affiliated
companies 1,865 2,638 1,999
Inventories 9,846 8,006 10,531
Prepaid expenses and other assets 623 407 632
Income taxes receivable - 190 138
Future tax assets 2,282 2,535 2,485
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Total current assets 62,470 58,485 58,890

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Capital assets, net 18,304 18,716 18,914
Other assets, net 10,595 10,483 10,062
Future tax assets 115 - -
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Total assets $91,484 $87,684 $87,866

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LIABILITIES & SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued
charges $ 8,384 $ 9,966 $7,140
Income taxes payable 324 - -
Due to affiliated companies 8,209 6,181 7,290

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Total current liabilities 16,917 16,147 14,430

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Future tax liabilities - 398 464

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Total liabilities 16,917 16,545 14,894

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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 72,570 69,142 70,975

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Total shareholders' equity 74,567 71,139 72,972

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Total liabilities and
shareholders' equity $91,484 $87,684 $87,866

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(See accompanying notes)



STATEMENTS OF INCOME AND RETAINED EARNINGS
------------------------------------------
(unaudited)
(In thousands of dollars except per share data)
Three months ended Nine months ended
September 30 September 30
2006 2005 2006 2005
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Revenue
Sales, less returns $ 37,026 $ 37,155 $ 66,859 $ 62,393
Other 546 596 1,487 1,367

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Total revenue 37,572 37,751 68,346 63,760

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Expenses
Operating 16,605 17,038 29,686 28,204
Editorial, selling, general,
and administrative 8,612 7,525 25,305 22,673
Amortization 2,961 3,334 5,768 6,081
Exchange (gain)/loss (56) (199) 130 29
Interest - - - -

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Total operating expenses 28,122 27,698 60,889 56,987

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Income before income taxes 9,450 10,053 7,457 6,773

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Provision for/(recovery of)
income taxes
Current 5,097 5,586 3,060 2,944
Future (1,570) (1,850) (259) (448)

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3,527 3,736 2,801 2,496

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Net income for the period 5,923 6,317 4,656 4,277


Retained earnings, beginning
of period 67,066 65,047 69,142 67,836
Dividends declared to shareholders
to date ($0.615 per share;
2005 - $0.570 per share) (419) (389) (1,228) (1,138)

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Retained earnings,
end of period $ 72,570 $ 70,975 $ 72,570 $ 70,975

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Earnings per share

Basic - net earnings for
the period $ 2.97 $ 3.16 $ 2.33 $ 2.14

Diluted - net earnings
for the period $ 2.97 $ 3.16 $ 2.33 $ 2.14

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(See accompanying notes)
Weighted average number of shares for basic and diluted earnings per share
for 2006 and 2005 is 1,996,638.



STATEMENTS OF CASH FLOW
-----------------------
(unaudited)
(In thousands of dollars)
Three months ended Nine months ended
September 30 September 30
2006 2005 2006 2005
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OPERATING ACTIVITIES
Net income for the period $ 5,923 $ 6,317 $ 4,656 $ 4,277
Add/deduct charges to income
not affecting cash:
Amortization 2,961 3,334 5,768 6,081
Future income taxes (1,734) (1,849) (260) (552)
Net change in non-cash working
capital balances related to
operations (1,445) (1,901) (9,444) (11,187)

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Cash provided by (used in)
operating activities 5,705 5,901 720 (1,381)

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INVESTING ACTIVITIES
Prepublication costs (1,494) (1,250) (4,864) (3,232)
Capital assets (219) (75) (604) (238)

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Cash used in investing activities (1,713) (1,325) (5,468) (3,470)

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FINANCING ACTIVITIES
Dividends paid to shareholders (419) (389) (1,228) (1,138)

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Cash used in financing activities (419) (389) (1,228) (1,138)

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Net increase/(decrease) in cash
during period 3,573 4,187 (5,976) (5,989)
Cash and cash equivalents,
beginning of period 17,657 11,320 27,206 21,496

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Cash and cash equivalents,
end of period 21,230 15,507 21,230 15,507

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Supplemental cash flow information
Income taxes refund $ (478) $ (87) $ (478) $ (87)
Income taxes paid $ 1,001 $ 994 $ 2,996 $ 3,496

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(See accompanying notes)


Contact Information

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