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McGraw-Hill Ryerson Reports 2011 Annual Results

(February 03, 2012)

WHITBY, ONTARIO -- (Marketwire) -- 02/03/12 -- McGraw-Hill Ryerson Limited (TSX:MHR) -

Attention: Business/Financial Editors

Three Months to December 31 ($000) This Year Year Ago ------------------------------------------------------- (unaudited) Sales, less returns $ 20,086 $ 20,708 Other 527 645 Rental 134 151 ---------- -------- Total Revenue 20,747 $ 21,504 Net Income 2,645 3,282 Net Income per share $ 1.32 $ 1.64 Twelve Months to December 31 ($000) ------------------------------------------------------- (unaudited) Sales, less returns $ 78,953 $ 78,249 Other 2,496 2,192 Rental 583 584 ---------- -------- Total Revenue $ 82,032 $ 81,025 Net Income 8,757 7,521 Net Income per share $ 4.39 $ 3.77

Annual Results


The Company's sales revenue, less returns, increased by 0.9% in 2011, with sales of $79.0 million, compared to $78.2 million in 2010.

The Company's Higher Education division experienced a decrease in sales of 2.4% compared to 2010, driven by a decline in sales of imported titles offset by an increase in sales of Canadian titles, and an acceleration of the transition to digitally delivered solutions. Higher Education continued its growth in the technology-enabled evolution with the success of McGraw-Hill Connect(TM), the next-generation online learning solution. The division continues to be a leader in the industry in partnership and development initiatives that provide educators the opportunity to evaluate our titles electronically and students the ability to purchase them in electronic form.

The School Division's sales increased by 15.4% compared to the previous year. Our Canadian publishing program experienced an increase in sales over the prior year, while our imported products experienced sales decreases. Imports are comprised solely of The McGraw-Hill Companies, Inc. imprints: Glencoe/McGraw-Hill, SRA, and The Wright Group. Digital products are also increasing in importance for this division.

Professional Division sales declined by 12.5% in 2011 compared to 2010. The decline in sales can be attributed to soft sales in the business, medical, and consumer categories. Digital sales out performed expectations in 2011 and will continue to perform well as a result of our product offerings and the market demand shift from print to digital content.

Cost of goods sold decreased to $29.5 million in 2011, from $30.9 million in 2010. Margins on sales improved as a result of a change in product mix compared to last year.

Operating expenses as a percentage of total revenue remained consistent in 2011 at 36.8% of total revenue compared to 2010. There were modest increases in several categories of expenses.

Amortization expenses for pre-publication costs increased to $9.0 million in 2011 compared to $7.9 million in 2010, driven by increases in the Company's pre-publication investment in the Higher Education and School divisions. Depreciation expense for capital assets remained consistent.

Finance income increased by $0.2 million, driven by higher average cash balances in 2011 compared to 2010. Finance costs in 2011, consisting mainly of banking charges, remained consistent in comparison to 2010.

Net income increased to $8.8 million from $7.6 million last year, mainly driven by the increased sales and improvement in gross margin.

Cash and cash equivalents as of December 31, 2011, decreased to $41.9 million from $44.4 million in 2010, mainly as a result of a $10.0 million special dividend paid in 2011. Excluding special dividends, cash and cash equivalents balances increased by $2.5 million in 2011 compared to 2010.

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 addition, in 2012 classes started one week later than the prior year which affects the timing of the placement of orders.

In the fourth quarter of 2011, total revenue decreased 3.5% compared to the prior quarter, caused by decreased sales in the Higher Education and Professional divisions. Higher Education sales decreased to $14.9 million from $15.6 million, mainly a result of a decline in sales of the imported products. School division sales increased $0.5 million, compared to the fourth quarter of 2010, to $3.2 million. Professional sales decreased $0.4 million from $2.4 million in 2010 as a result of the softening in consumer demand this year. Net income declined by $0.6 million in the fourth quarter compared to the corresponding quarter in 2010, mainly driven by the sales results.

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 2011 was $82 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 2011 2010 $ $ ---------------------------------------------------------------------------- Sales revenue, less returns 78,953 78,249 Other income 2,496 2,192 Rental income 583 584 ---------------------------------------------------------------------------- Total revenue 82,032 81,025 Cost of goods sold 29,470 30,866 ---------------------------------------------------------------------------- Gross profit 52,562 50,159 Operating expenses (notes 5, 7 and 8) 30,224 30,208 Amortization - pre-publication costs (note 6) 9,047 7,907 Depreciation - property, plant and equipment (note 12) 949 951 ---------------------------------------------------------------------------- Operating income 12,342 11,093 Finance income (note 14) 386 203 Finance costs (141) (153) Foreign exchange loss (88) (105) ---------------------------------------------------------------------------- Income before income taxes 12,499 11,038 Income tax expense (note 9) 3,742 3,517 ---------------------------------------------------------------------------- Net income and comprehensive income for the year attributable to equity holders of the Company 8,757 7,521 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Earnings per share Basic and diluted $4.39 $3.77 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes McGraw-Hill Ryerson Limited STATEMENTS OF FINANCIAL POSITION (in thousands of dollars) As at December 31, December 31, January 1, 2011 2010 2010 $ $ $ ---------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 41,926 44,394 35,878 Marketable securities (note 14) 716 832 821 Trade and other receivables, net (note 14) 11,429 9,273 11,319 Inventories, net (note 11) 6,123 5,370 6,052 Due from parent and affiliated companies (note 10) 1,925 1,403 2,564 Income taxes receivable - - 2,368 Prepaid expenses and other assets 280 291 318 ---------------------------------------------------------------------------- Total current assets 62,399 61,563 59,320 ---------------------------------------------------------------------------- Property, plant and equipment, net (note 12) 14,071 14,630 15,182 Intangible assets (note 6) 16,439 18,205 19,214 Deferred tax assets, net (note 9) 494 812 1,524 ---------------------------------------------------------------------------- Total non-current assets 31,004 33,647 35,920 ---------------------------------------------------------------------------- 93,403 95,210 95,240 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- LIABILITIES AND EQUITY Current liabilities Trade and other payables 11,122 9,949 9,862 Income taxes payable 713 6 - Due to parent and affiliated companies (note 10) 4,784 4,675 5,893 ---------------------------------------------------------------------------- Total current liabilities 16,619 14,630 15,755 ---------------------------------------------------------------------------- Employee future benefits (note 7) 2,281 2,588 2,555 Long-term payable (note 5) 44 391 - ---------------------------------------------------------------------------- Total liabilities 18,944 17,609 18,310 ---------------------------------------------------------------------------- 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 702 372 104 Retained earnings 71,760 75,232 74,829 ---------------------------------------------------------------------------- Total equity 74,459 77,601 76,930 ---------------------------------------------------------------------------- 93,403 95,210 95,240 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes McGraw-Hill Ryerson Limited STATEMENTS OF CHANGES IN EQUITY (in thousands of dollars) Share Paid in Retained capital capital earnings Total $ $ $ $ ---------------------------------------------------------------------------- Balance, January 1, 2010 1,997 104 74,829 76,930 Dividends paid ($3.565 per share) - - (7,118) (7,118) Additional paid-in capital - 268 - 268 Net income and comprehensive income attributable to equity holders of the Company - - 7,521 7,521 ---------------------------------------------------------------------------- Balance, December 31, 2010 1,997 372 75,232 77,601 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 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 - 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 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes McGraw-Hill Ryerson Limited STATEMENTS OF CASH FLOWS (in thousands of dollars) For the years ended December 31 2011 2010 $ $ ---------------------------------------------------------------------------- Operating activities Net income for the year 8,757 7,521 Add (deduct) charges not affecting cash: Amortization - pre-publication costs (note 6) 9,047 7,907 Depreciation - property, plant and equipment (note 12) 949 951 (Decrease) increase in employee future benefits (307) 33 Deferred taxes (note 9) 318 712 Net change in non-cash working capital balances related to operations (note 15) (1,735) 5,654 ---------------------------------------------------------------------------- Cash provided by operating activities 17,029 22,778 ---------------------------------------------------------------------------- Investing activities Investment in pre-publication costs (7,324) (7,002) Investment in property, plant and equipment (390) (399) Increase (decrease) in marketable securities 116 (11) ---------------------------------------------------------------------------- Cash used in investing activities (7,598) (7,412) ---------------------------------------------------------------------------- Financing activities Dividends paid to shareholders (12,229) (7,118) Change in paid-in capital 330 268 ---------------------------------------------------------------------------- Cash used in financing activities (11,899) (6,850) ---------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents (2,468) 8,516 Cash and cash equivalents, beginning of year 44,394 35,878 ---------------------------------------------------------------------------- Cash and cash equivalents, end of year 41,926 44,394 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notes

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


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