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McGraw-Hill Ryerson Reports 2013 Annual Results

WHITBY, ONTARIO -- (Marketwired) -- 02/07/14 -- McGraw-Hill Ryerson Limited (TSX: MHR)

Attention: Business/Financial Editors


Three Months to December 31 ($000)
(unaudited)                                            This Year    Year Ago
Sales, less returns                                       18,943 $    18,931
Other                                                      1,098       2,876
Rental                                                       132         182
                                                    ------------------------
Total Revenue                                        $    20,173 $    21,989

Net Income                                                 2,023       4,362
Net Income per share                                 $      1.01 $      2.18

Twelve Months to December 31 ($000)
(unaudited)
Sales, less returns                                  $    68,204 $    72,258
Other                                                      2,273       4,283
Rental                                                       640         541
                                                    ------------------------
Total Revenue                                        $    71,117 $    77,082

Net Income                                                 5,819       8,145
Net Income per share                                 $      2.91 $      4.08

Annual Results

The Company's sales revenue, less returns, decreased by 5.6% in 2013, with sales of $68.2 million, compared to $72.3 million in 2012.

The Higher Education Division reported consistent sales with a slight increase of 0.4% in a market that was lower year over year. Sales were supported by the continued increase in adoption of its digital solutions. Higher Education accelerated its leadership in the technology-enabled evolution of education with the continued growth of McGraw-Hill Connect™, integrated eContent and online homework solutions, and the LearnSmart Advantage™ suite of adaptive learning solutions. The Division continues to be a leader in the industry in partnership and development initiatives that provide educators and students the opportunity to evaluate and purchase our learning solutions directly, and in the forms they prefer, seamlessly integrated into institutions' learning management systems and devices of their choice.

The School Division's sales decreased by 26.7% compared to the previous year. The decline in revenue is a function of non-repeating 2012 sole source contracts and industry-wide sales declines, partly the result of a slow release of new curricula. Industry sales declined by 12.0% relative to 2012 (based on Canadian Education Resource Council data).

The Professional Division net sales grew by 17.9% in 2013 compared to 2012. The improvement in sales was partly the result of a decrease in returns, along with continued growth in eBook sales and our Access suite of digital products.

Cost of goods sold decreased to $25.4 million in 2013, from $26.8 million in 2012. This is consistent with the decrease in sales.

Operating expenses decreased to $29.4 million, from $30.2 million in 2012. There were reductions in compensation, promotion, and legal expenses that were offset by a restructuring charge of $2.9 million. This restructuring will allow us to manage our operating expenses while improving our support for evolving areas such as digital product development and technical support for our customers.

Amortization expenses for pre-publication costs decreased to $7.5 million in 2013 compared to $8.5 million in 2012. The decrease is partly attributable to delays in the release of curricular revisions that impact the School publishing program.

Finance income decreased by $0.2 million, driven by lower average cash balances in 2013 compared to 2012. Finance costs in 2013, consisting mainly of banking charges, remained consistent with prior year.

Net income decreased to $5.8 million from $8.1 million last year, mainly driven by the sales decrease.

Cash increased to $26.4 million as of December 31, 2013 from $15.1 million in 2012, which is mainly a result of the special dividend payments made during the prior year. Total dividend payments were $2.5 million in 2013 compared to $40.3 million in 2012.

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 2013, total revenue decreased 8.3% compared to the fourth quarter of 2012, as a result of a non-recurring retroactive copyright payment received in the prior year. Higher Education sales decreased to $14.5 million from $15.0 million. School division sales decreased $0.4 million, compared to the fourth quarter of 2012, to $2.2 million. Professional sales increased $0.9 million from $1.3 million in 2012. Net income decreased by $2.3 million in the fourth quarter compared to the corresponding quarter in 2012 mainly driven by the non-recurring copyright payment received in 2012.

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 2013 was $71 million. Additional information is available at http://www.mheducation.ca.



               STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
    McGraw-Hill Ryerson Limited. Incorporated under the laws of Ontario
(In thousands of dollars-except per share data)
Year ended December 31                                      2013       2012
Revenue                                                            (note 2)
Sales revenue, less returns                               68,204     72,258
Other income                                               2,273      4,283
Rental income                                                640        541
----------------------------------------------------------------------------
Total revenue                                             71,117     77,082

Cost of goods sold (note 11)                              25,353     26,754
----------------------------------------------------------------------------
Gross profit                                              45,764     50,328
Operating expenses (notes 5, 7 and 8)                     29,422     30,208
Amortization, net of impairment-pre-publication costs
 (note 6)                                                  7,520      8,477
Depreciation-property, plant and equipment (note 12)         785        842
----------------------------------------------------------------------------
Operating income                                           8,037     10,801
Finance income (note 14)                                     152        323
Finance costs                                                191        178
Foreign exchange gain (loss)                                 (90)       282
----------------------------------------------------------------------------
Income before income taxes                                 7,908     11,228
Income tax expense (note 9)                                2,089      3,083
----------------------------------------------------------------------------
Net income for the year attributable to equity holders
 of the Company                                            5,819      8,145
Other comprehensive income (loss)
Actuarial gain (loss) on employee future benefits, net
 of tax (note 7)                                             468       (122)
----------------------------------------------------------------------------
Total comprehensive income for the year attributable
 to equity holders of the Company                          6,287      8,023
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share
Basic and diluted                                      $    2.91  $    4.08
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                      STATEMENTS OF FINANCIAL POSITION
(In thousands of dollars)
                                               December  December January 1,
As at                                          31, 2013  31, 2012       2012
Assets                                                   (note 2)   (note 2)
Current
Cash (note 14)                                   26,370    15,146     41,926
Marketable securities (note 14)                     998       799        716
Trade and other receivables, net (note 14)        8,976    10,463     11,429
Inventories, net (note 11)                        3,312     4,601      6,123
Due from parent and affiliated companies
 (note 10)                                          559     1,783      1,925
Prepaid expenses and other assets                   401       333        280
Income taxes receivable                             293         -          -
----------------------------------------------------------------------------
Total current assets                             40,909    33,125     62,399
----------------------------------------------------------------------------
Property, plant and equipment, net (note 12)     12,757    13,423     14,071
Intangible assets (note 6)                       11,118    13,754     16,439
Deferred tax assets, net (note 9)                 1,013       773        469
----------------------------------------------------------------------------
Total non-current assets                         24,858    27,950     30,979
----------------------------------------------------------------------------
Total assets                                     65,797    61,075     93,378
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and Equity
Current
Trade and other payables                         10,817    10,045     10,849
Realignment payable (note 5)                      1,776       646        273
Income taxes payable                                  -       265        713
Due to parent and affiliated companies (note
 10)                                              3,709     4,693      4,784
----------------------------------------------------------------------------
Total current liabilities                        16,302    15,649     16,619
----------------------------------------------------------------------------
Employee future benefits (note 7)                 1,894     2,517      2,185
Long-term payable (note 5)                        1,003       350         44
----------------------------------------------------------------------------
Total liabilities                                19,199    18,516     18,848
----------------------------------------------------------------------------
Equity
Share 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                                   1,319     1,081        702
Accumulated other comprehensive income (loss)       346      (122)        71
Retained earnings                                42,936    39,603     71,760
----------------------------------------------------------------------------
Total equity                                     46,598    42,559     74,530
----------------------------------------------------------------------------
Total liabilities and equity                     65,797    61,075     93,378
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                      STATEMENTS OF CHANGES IN EQUITY
(In thousands of dollars)
                                             Accumulated
                                                   other
                             Share Paid-in comprehensive  Retained
                           capital capital        income  earnings    Total
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                       -       -             -     8,145    8,145
Items not to be reclassified to profit or loss in subsequent periods:
Other comprehensive loss         -       -          (122)        -     (122)
----------------------------------------------------------------------------
Balance, December 31, 2012   1,997   1,081          (122)   39,603   42,559
Dividends paid ($1.245 per
 share)                          -       -             -    (2,486)  (2,486)
Additional paid-in capital
 (note 8)                        -     238             -         -      238
Net Income                       -       -             -     5,819    5,819
Items not to be reclassified to profit or loss in subsequent periods:
Other comprehensive income       -       -           468         -      468
----------------------------------------------------------------------------
Balance, December 31, 2013   1,997   1,319           346    42,936   46,598
----------------------------------------------------------------------------



                          STATEMENT OF CASH FLOWS
(In thousands of dollars)

Years ended December 31                                       2013     2012
Operating Activities
Net income for the year                                      5,819    8,145
Add (deduct) non-cash items
  Amortization, net of impairment-pre-publication costs
   (note 6)                                                  7,520    8,477
  Depreciation-property, plant and equipment (note 12)         785      842
  Increase (decrease) in employee future benefits             (155)      72
Deferred taxes (note 9)                                       (240)    (237)
----------------------------------------------------------------------------
                                                            13,729   17,299
Net change in non-cash working capital balances related to
 operations (note 15)                                        4,973    1,941
----------------------------------------------------------------------------
Cash provided by operating activities                       18,702   19,240
----------------------------------------------------------------------------
Investing Activities
Investment in pre-publication costs (note 6)                (4,912)  (5,820)
Investment in property, plant and equipment (note 12)         (119)    (194)
Increase in marketable securities                             (199)     (83)
----------------------------------------------------------------------------
Cash used in investing activities                           (5,230)  (6,097)
----------------------------------------------------------------------------
Financing Activities
Dividends paid to shareholders                              (2,486) (40,302)
Change in paid-in capital (note 8)                             238      379
----------------------------------------------------------------------------
Cash used in financing activities                           (2,248) (39,923)
----------------------------------------------------------------------------

Net increase (decrease) in cash during the year             11,224  (26,780)
Cash, beginning of year                                     15,146   41,926
----------------------------------------------------------------------------
Cash end of year                                            26,370   15,146
----------------------------------------------------------------------------
----------------------------------------------------------------------------


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

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