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McGraw-Hill Ryerson Reports 2012 Annual Results

WHITBY, ONTARIO -- (Marketwire) -- 02/15/13 -- McGraw-Hill Ryerson (TSX:MHR) -

Attention: Business/Financial Editors

Three Months to December 31 ($000)                                          
(unaudited)                                        This Year        Year Ago
Sales, less returns                            $      18,931   $      20,086
Other                                                  3,130             527
Rental                                                   182             134
                                              --------------  --------------
Total Revenue                                  $      22,243   $      20,747
                                                                            
Net Income                                             4,440           2,645
Net Income per share                           $        2.22   $        1.32
                                                                            
Twelve Months to December 31 ($000)                                         
(unaudited)                                                                 
Sales, less returns                            $      72,258   $      78,953
Other                                                  4,283           2,496
Rental                                                   541             583
                                              --------------  --------------
Total Revenue                                  $      77,082   $      82,032
                                                                            
Net Income                                             8,145           8,757
Net Income per share                           $        4.08   $        4.39

Annual Results

The Company's sales revenue, less returns, decreased by 8.5% in 2012, with sales of $72.3 million, compared to $79.0 million in 2011.

The Higher Education Division experienced a decrease in overall revenue of 6.4% compared to 2011, driven by a decline in sales of print partially offset by strong growth in digital solutions. Higher Education continued its industry leadership in the technology-enabled evolution of education with the success of McGraw-Hill Connect(TM), the eBook and online homework solution, and the LearnSmart Advantage(TM) suite of adaptive learning solutions. Industry-wide sales in this sector declined 2.3% according to the Canadian Publishers' Council data.(1)

The School Division's sales decreased by 9.7% compared to the previous year. The decline in revenue from the Canadian publishing program is a function of non-repeating 2011 sole source contracts and industry-wide sales declines, the result of slow release of new curriculum and funding in Ontario. Industry sales declined by 6.7% relative to 2011 (based on Canadian Education Resource Council data).(2)

Professional Division sales declined by 21.8% in 2012 compared to 2011. The decline in sales was partly the result of on-going transition to e-book sales, with lower unit revenue, and to particularly high returns in some print product categories. Digital sales again grew strongly in 2012, and are expected to continue to perform well as market demand shifts from print to digital content.

Cost of goods sold decreased to $26.8 million in 2012, from $29.5 million in 2011. Margins on sales improved as a result of a change in product mix compared to last year.

Operating expenses remained consistent at $30.2 million in 2012. There were reductions in promotion and compensation expenses that were offset by a restructuring charge of $1.1 million. This restructuring will improve the expense base of the company to better suit our growing focus on digital learning solutions.

Amortization expenses for pre-publication costs decreased to $8.5 million in 2012 compared to $9.0 million in 2011. The decrease is attributable to the delay in government curriculum revisions for the School publishing program. Depreciation expense for capital assets decreased slightly to $0.8 million from $0.9 million in 2011.

Finance income decreased by $0.1 million, driven by lower average cash balances in 2012 compared to 2011. Finance costs in 2012, consisting mainly of banking charges, increased by $0.1 million.

Net income decreased to $8.1 million from $8.8 million last year, mainly driven by the sales decrease.

Cash and cash equivalents decreased to $15.1 million as of December 31, 2012 from $41.9 million in 2011, which is mainly a result of the special dividend payments made during the year. Total dividend payments were $40.3 million in 2012 compared to $12.2 million in 2011. Excluding special dividends, cash and cash equivalents balances increased by $1.2 million in 2012 compared to 2011.

Q4 Results

Most of the Company's sales revenue is seasonal, based on the education industry's school terms for the School and Higher Education divisions. As a result, the Company earns a significant amount of its total sales revenue in the third and fourth quarters of each year.

In the fourth quarter of 2012, total revenue increased 7.2% compared to the prior quarter, caused mainly by one-time retroactive copyright income. Higher Education sales increased to $15.0 million from $14.9 million. School division sales decreased $0.6 million, compared to the fourth quarter of 2011, to $2.6 million. Professional sales decreased $0.7 million from $2.0 million in 2011 as a result of the softening in consumer demand this year. Net income increased by $1.8 million in the fourth quarter compared to the corresponding quarter in 2011, mainly driven by the revenue increase.

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

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 2012 was $77 million. Additional information is available at http://www.mcgrawhill.ca.

McGraw-Hill Ryerson Limited                                                 
                                                                            
               STATEMENTS OF INCOME AND COMPREHENSIVE INCOME                
              (in thousands of dollars except per share data)               
                                                                            
                                                       For the years ended  
                                                           December 31      
                                                            2012       2011 
                                                               $          $ 
----------------------------------------------------------------------------
Sales revenue, less returns                               72,258     78,953 
Other income                                               4,283      2,496 
Rental income                                                541        583 
----------------------------------------------------------------------------
Total revenue                                             77,082     82,032 
Cost of goods sold (note 11)                              26,754     29,470 
----------------------------------------------------------------------------
Gross profit                                              50,328     52,562 
Operating expenses (notes 5, 7 and 8)                     30,208     30,224 
Amortization - pre-publication costs (note 6)              8,477      9,047 
Depreciation - property, plant and equipment (note 12)       842        949 
----------------------------------------------------------------------------
Operating income                                          10,801     12,342 
Finance income (note 14)                                     323        386 
Finance costs                                               (178)      (141)
Foreign exchange gain (loss)                                 282        (88)
----------------------------------------------------------------------------
Income before income taxes                                11,228     12,499 
Income tax expense (note 9)                                3,083      3,742 
----------------------------------------------------------------------------
Net income and comprehensive income for the year                            
attributable to equity holders of the Company              8,145      8,757 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Earnings per share                                                          
Basic and diluted                                       $   4.08   $   4.39 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
McGraw-Hill Ryerson Limited                                                 
                                                                            
                      STATEMENTS OF FINANCIAL POSITION                      
                          (in thousands of dollars)                         
                                                                            
As at                                              December 31, December 31,
                                                           2012         2011
                                                              $            $
----------------------------------------------------------------------------
                                                                            
ASSETS                                                                      
Current                                                                     
Cash and cash equivalents (note 14)                      15,146       41,926
Marketable securities (note 14)                             799          716
Trade and other receivables, net (note 14)               10,463       11,429
Inventories, net (note 11)                                4,601        6,123
Due from parent and affiliated companies (note 10)        1,783        1,925
Prepaid expenses and other assets                           333          280
----------------------------------------------------------------------------
Total current assets                                     33,125       62,399
----------------------------------------------------------------------------
Property, plant and equipment, net (note 12)             13,423       14,071
Intangible assets (note 6)                               13,754       16,439
Deferred tax assets, net (note 9)                           731          494
----------------------------------------------------------------------------
Total non-current assets                                 27,908       31,004
----------------------------------------------------------------------------
                                                         61,033       93,403
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
LIABILITIES AND EQUITY                                                      
Current liabilities                                                         
Trade and other payables (note 5)                        10,691       11,122
Income taxes payable                                        265          713
Due to parent and affiliated companies (note 10)          4,693        4,784
----------------------------------------------------------------------------
Total current liabilities                                15,649       16,619
----------------------------------------------------------------------------
Employee future benefits (note 7)                         2,353        2,281
Long-term payable (note 5)                                  350           44
----------------------------------------------------------------------------
Total liabilities                                        18,352       18,944
----------------------------------------------------------------------------
Equity                                                                      
Issued capital                                                              
  Authorized 5,000,000 no par value common shares                           
  Issued and outstanding 1,996,638 common shares          1,997        1,997
Paid-in capital                                           1,081          702
Retained earnings                                        39,603       71,760
----------------------------------------------------------------------------
Total equity                                             42,681       74,459
----------------------------------------------------------------------------
                                                         61,033       93,403
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
McGraw-Hill Ryerson Limited                                                 
                                                                            
                      STATEMENTS OF CHANGES IN EQUITY                       
                         (in thousands of dollars)                          
                                                                            
                                        Share   Paid in  Retained           
                                      capital   capital  earnings     Total 
                                            $         $         $         $ 
----------------------------------------------------------------------------
                                                                            
                                                                            
Balance, December 31, 2010              1,997       372    75,232    77,601 
Dividends paid ($6.125 per share)           -         -   (12,229)  (12,229)
Additional paid-in capital (note 8)         -       330         -       330 
Net income and comprehensive income                                         
 attributable to equity holders of                                          
 the Company                                -         -     8,757     8,757 
----------------------------------------------------------------------------
Balance, December 31, 2011              1,997       702    71,760    74,459 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
                                                                            
Balance, December 31, 2011              1,997       702    71,760    74,459 
Dividends paid ($20.185 per share)          -         -   (40,302)  (40,302)
Additional paid-in capital (note 8)         -       379         -       379 
Net income and comprehensive income                                         
 attributable to equity holders of                                          
 the Company                                -         -     8,145     8,145 
----------------------------------------------------------------------------
Balance, December 31, 2012              1,997     1,081    39,603    42,681 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
McGraw-Hill Ryerson Limited                                                 
                                                                            
                          STATEMENTS OF CASH FLOWS                          
                         (in thousands of dollars)                          
                                                                            
For the years ended December 31                                             
                                                                            
                                                            2012       2011 
                                                               $          $ 
----------------------------------------------------------------------------
                                                                            
Operating activities                                                        
Net income for the year                                    8,145      8,757 
Add (deduct) charges not affecting cash:                                    
  Amortization - pre-publication costs (note 6)            8,477      9,047 
  Depreciation - property, plant and equipment (note                        
   12)                                                       842        949 
  (Decrease) increase in employee future benefits             72       (307)
  Deferred taxes (note 9)                                   (237)       318 
Net change in non-cash working capital balances                             
 related to operations (note 15)                           1,941     (1,735)
----------------------------------------------------------------------------
Cash provided by operating activities                     19,240     17,029 
----------------------------------------------------------------------------
                                                                            
Investing activities                                                        
Investment in pre-publication costs (note 6)              (5,820)    (7,324)
Investment in property, plant and equipment (note 12)       (194)      (390)
Increase (decrease) in marketable securities                 (83)       116 
----------------------------------------------------------------------------
Cash used in investing activities                         (6,097)    (7,598)
----------------------------------------------------------------------------
                                                                            
Financing activities                                                        
Dividends paid to shareholders                           (40,302)   (12,229)
Change in paid-in capital (note 8)                           379        330 
----------------------------------------------------------------------------
Cash used in financing activities                        (39,923)   (11,899)
----------------------------------------------------------------------------
                                                                            
Net (decrease) increase in cash and cash equivalents     (26,780)    (2,468)
Cash and cash equivalents, beginning of year              41,926     44,394 
----------------------------------------------------------------------------
Cash and cash equivalents, end of year                    15,146     41,926 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) McGraw-Hill Ryerson does not publish in all segments of this sector.

(2) Ibid.

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

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