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McGraw-Hill Ryerson Reports First Quarter Results

WHITBY, ONTARIO -- (Marketwired) -- 04/25/14 -- McGraw-Hill Ryerson Limited (TSX: MHR)

Attention: Business/Financial Editors

Three Months to March 31 ($000)                     2014                2013
(unaudited)
Sales revenue, less returns                       $6,884              $7,387
Other income                                         233                 302
Rental income                                        138                 182
                                      ------------------  ------------------
Total Revenue                                     $7,255              $7,871

Net loss                                        ($3,081)            ($1,805)
Net loss per share                              ($ 1.54)            ($ 0.90)

Summary

The first quarter is historically the quarter with the lowest sales of the fiscal year, as sales are heavily weighted towards the second half of the calendar year leading up to the beginning of the school season. As expenses are more evenly distributed over the course of the year, the Company generally reports a net loss in the first quarter of each year. For the first quarter in 2014, the net loss is $3.1 million, compared to a net loss of $1.8 million in the first quarter of 2013.

Revenue

Total revenue for the first quarter decreased by 7.8% to $7.3 million in 2014 compared to $7.9 million in the corresponding quarter of 2013.

The Higher Education Division sales remained consistent at $4.2 million in the first quarter of 2014 when compared to the first quarter of 2013.

The School Division sales decreased by $0.2 million to $2.0 million in the first quarter of 2014 from $2.2 million in the corresponding quarter of 2013 as a result of non-recurring adoptions in 2013 in Ontario and the Atlantic provinces.

In the Professional Division, sales decreased by $0.3 million in the first quarter of 2014 to $0.8 million due to a decrease in the wholesale market.

Other income, representing billed freight, copyright licensing, commission on foreign sales, and translation fees, decreased in the first quarter of 2014 by 22.8% to $0.2 million from $0.3 million in the corresponding quarter of 2013.

Rental income from the tenant at the Company's Whitby, Ontario facility decreased slightly to $0.1 million in the first quarter of 2014 compared to $0.2 million in the first quarter of 2013 as a result of the lower escalation charges to our tenant.

Expenses

Cost of goods sold decreased by $0.2 million to $2.5 million in the first quarter of 2014 from $2.7 million in the corresponding quarter of 2013 which is consistent with the lower revenues.

Operating expenses increased slightly for the first quarter to $6.5 million compared to $6.4 million for the same quarter in 2013. The increase is a result of increased professional fees.

Amortization expense for pre-publication costs decreased by $0.5 million to $0.3 million in the first quarter of 2014 from $0.8 million in the corresponding quarter of 2013. Depreciation expense for capital assets in the first quarter remained consistent at $0.2 million.

The Company has listed its building located in Whitby, Ontario for sale as of March 31, 2014. The asset has been recorded at market value and an impairment of the asset was recorded for $1.4 million.

Finance income increased $0.03 million as a result of higher cash balances in the first quarter of 2014 than in the first quarter of 2013. Finance costs, consisting mainly of banking charges, in the first quarter of 2014 remained consistent with the same quarter of 2013.

In the first quarter, the Company reported a foreign exchange loss of $0.2 million compared to a $0.1 million loss in the same period of 2013. The Company incurs foreign exchange gains and losses throughout the year as a result of the volume of related-party transactions, most of which are denominated in U.S. dollars. The Company continues to employ policies to minimize the impact of these currency fluctuations.

Net loss increased to $3.1 million from $1.6 million in the first quarter of 2013, mainly driven by the impairment on asset. Excluding the impact of impairment, net loss of $1.7 million is consistent with 2013.

Cash increased to $21.8 million as of March 31, 2014 from $10.2 million in 2013. This increase was generated from operations.

The Corporation and McGraw-Hill Global Education Holdings, LLC ("McGraw-Hill Education") announced on April 17, 2104 that they have entered into a definitive acquisition agreement pursuant to which McGraw-Hill Education will indirectly acquire all of the outstanding common shares of McGraw-Hill Ryerson that it does not already own at a price of C$50.00 cash per common share. Investmentaktiengesellschaft fur langfristige Investoren TGV, owner of approximately 12.5% of the outstanding common shares of McGraw-Hill Ryerson, has separately entered into an agreement with McGraw-Hill Education to vote its shares in favour of the transaction at a special meeting of McGraw-Hill Ryerson shareholders to be held to approve the transaction.

The attached financial statements have been prepared by management of McGraw-Hill Ryerson Limited. The financial statements for the three month period ended March 31, 2014 and March 31, 2013 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. Total revenue in 2013 was $71 million. Additional information is available at http://www.mheducation.ca.

McGraw-Hill Ryerson Limited
Incorporated under the laws of Ontario

                  STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
                                 (unaudited)

(In thousands of dollars-except per share data)
Three months ended March 31                                 2014        2013

Revenue

Sales revenue, less returns                                6,884       7,387
Other income                                                 233         302
Rental income                                                138         182
----------------------------------------------------------------------------
Total revenue                                              7,255       7,871

Cost of goods sold                                         2,495       2,668
----------------------------------------------------------------------------
Gross profit                                               4,760       5,203
Operating expenses                                         6,505       6,442
Amortization, net of impairment-pre-publication
 costs                                                       330         806
Depreciation-property, plant and equipment                   189         201
Impairment loss on assets                                  1,415           -
----------------------------------------------------------------------------
Operating loss                                           (3,679)     (2,246)
Finance income                                                72          37
Finance costs                                               (46)        (40)
Foreign exchange loss                                      (168)        (71)
----------------------------------------------------------------------------
Loss before income taxes                                 (3,821)     (2,320)
Income tax recovery                                        (740)       (515)
----------------------------------------------------------------------------
Net loss for the period attributable to equity
 holders of the Company                                  (3,081)     (1,805)
Other comprehensive income (loss)
Actuarial gain (loss) on employee future benefits,
 net of tax                                                    -         191
----------------------------------------------------------------------------
Total comprehensive loss for the period attributable
 to equity holders of the Company                        (3,081)     (1,614)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Loss per share
Basic and diluted                                        ($1.54)     ($0.90)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

McGraw-Hill Ryerson Limited

                      STATEMENTS OF FINANCIAL POSITION
                                 (unaudited)
(In thousands of dollars)
                                         March 31,  December 31,   March 31,
As at                                         2014          2013        2013
Assets
Current
Cash                                        21,789        26,370      10,235
Marketable securities                        1,052           998         859
Trade and other receivables, net             1,285         8,976       2,798
Inventories, net                             5,550         3,312       6,913
Due from parent and affiliated
 companies                                     624           559       1,088
Prepaid expenses and other assets              590           401         917
Assets available for sale                   10,750             -           -
Income taxes receivable                      2,517           293       2,011
----------------------------------------------------------------------------
Total current assets                        44,157        40,909      24,821
----------------------------------------------------------------------------
Property, plant and equipment, net             414        12,757      13,266
Intangible assets                           11,491        11,118      13,683
Deferred tax assets, net                       314         1,013           -
----------------------------------------------------------------------------
Total non-current assets                    12,219        24,858      26,949
----------------------------------------------------------------------------
Total assets                                56,376        65,797      51,770
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and Equity
Current
Trade and other payables                     8,262        10,817       7,808
Realignment payable                          1,264         1,776           -
Due to parent and affiliated companies       1,070         3,709         645
----------------------------------------------------------------------------
Total current liabilities                   10,596        16,302       8,453
----------------------------------------------------------------------------
Employee future benefits                     1,925         1,894       2,547
Long-term payable                              930         1,003           -
Deferred tax liabilities                         -             -         430
----------------------------------------------------------------------------
Total non-current liabilities                2,855         2,897       2,977
----------------------------------------------------------------------------
Total liabilities                           13,451        19,199      11,430
----------------------------------------------------------------------------
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                              1,356         1,319       1,265
Accumulated other comprehensive income
 (loss)                                        346           346       (122)
Retained earnings                           39,226        42,936      37,200
----------------------------------------------------------------------------
Total equity                                42,925        46,598      40,340
----------------------------------------------------------------------------
Total liabilities and equity                56,376        65,797      51,770
----------------------------------------------------------------------------
----------------------------------------------------------------------------


McGraw-Hill Ryerson Limited

                       STATEMENTS OF CHANGES IN EQUITY
                                 (unaudited)
(In thousands of dollars)
                                               Accumulated
                                                     other
                             Share  Paid-in  comprehensive Retained
                           capital  capital  income (loss) earnings    Total
Balance, December 31,
 2012                        1,997    1,081          (122)   39,603   42,559
Dividends paid ($0.30 per
 share)                          -        -              -    (598)    (598)
Additional paid-in
 capital                         -      184              -        -      184
Net loss                         -        -              -  (1,805)  (1,805)
Balance, March 31, 2013      1,997    1,265          (122)   37,200   40,340
----------------------------------------------------------------------------

Balance, December 31,
 2013                        1,997    1,319            346   42,936   46,598
Dividends paid ($0.315
 per share)                      -        -              -    (629)    (629)
Additional paid-in
 capital                         -       37              -        -       37
Net Income                       -        -              -  (3,081)  (3,081)
Balance, March 31, 2014      1,997    1,356            346   39,226   42,925
----------------------------------------------------------------------------


McGraw-Hill Ryerson Limited

                          STATEMENTS OF CASH FLOWS
                                 (unaudited)
(In thousands of dollars)

Three months ended March 31                              2014           2013
Operating Activities
Net loss for the period                               (3,081)        (1,805)
Add (deduct) non-cash items
  Amortization, net of impairment-pre-
   publication costs                                      330            806
  Depreciation-property, plant and equipment              189            201
  Impairment loss on assets                             1,415              -
  Decrease in long-term payable                          (73)          (350)
  Increase in employee future benefits                     30             30
Deferred taxes                                            699          1,161
----------------------------------------------------------------------------
                                                        (491)             43
Net change in non-cash working capital
 balances related to operations                       (2,724)        (3,695)
----------------------------------------------------------------------------
Cash used by operating activities                     (3,215)        (3,652)
----------------------------------------------------------------------------
Investing Activities
Investment in pre-publication costs                     (709)          (741)
Investment in property, plant and equipment              (11)           (44)
Increase in marketable securities                        (54)           (60)
----------------------------------------------------------------------------
Cash used in investing activities                       (774)          (845)
----------------------------------------------------------------------------
Financing Activities
Dividends paid to shareholders                          (629)          (598)
Change in paid-in capital                                  37            184
----------------------------------------------------------------------------
Cash used in financing activities                       (592)          (414)
----------------------------------------------------------------------------
Net decrease in cash during the period                (4,581)        (4,911)
Cash, beginning of period                              26,370         15,146
----------------------------------------------------------------------------
Cash, end of period                                    21,789         10,235
----------------------------------------------------------------------------
----------------------------------------------------------------------------


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

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