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McGraw-Hill Ryerson Reports First Quarter Results

(April 27, 2012)

WHITBY, ONTARIO -- (Marketwire) -- 04/27/12 -- McGraw-Hill Ryerson Limited (TSX:MHR) -

Attention: Business/Financial Editors

Three Months to March 31 ($000) 2012 2011 ----------------------------- (unaudited) Sales revenue, less returns $7,693 $8,366 Other income 127 177 Rental income 115 151 -------------- --------------- Total Revenue $7,935 $8,694 Net loss ($2,744) ($2,192) Net loss per share ($1.37) ($1.10)

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 2012, the net loss is $2.7 million, compared to a net loss of $2.2 million in the first quarter of 2011.

Revenue

Total revenue for the first quarter decreased by 8.7% to $7.9 million in 2012 compared to $8.7 million in 2011.

The Higher Education Division sales decreased by $0.2 million in the first quarter of 2012 to $3.9 million. Despite this modest decline, digital and custom products continue to be a growth area for this Division.

The School Division sales decreased 13.7% to $2.7 million in the first quarter of 2012, from $3.1 million in the corresponding quarter of 2011. This decrease was mainly driven by nonrecurring orders placed in 2011 by the Atlantic provinces.

In the Professional Division, sales remained consistent in the first quarter of 2012 when compared to the same period in the prior year at $1.1 million.

Other income, representing billed freight, content licensing, and translation fees, decreased as sales have decreased. Rental income from the tenant at the Company's Whitby, Ontario facility decreased slightly in the first quarter of 2012 compared to the first quarter of 2011 as a result of lower rental escalation charges.

Expenses

Cost of goods sold decreased slightly to $2.7 million from $2.8 million in the first quarter of last year, in line with lower sales.

Operating expenses increased to $8.0 million during the first quarter of 2012 from $7.7 million in the comparative period of the prior year, as a result of a shift in promotional expenses from later in the year to the first quarter.

Amortization expense for pre-publication costs decreased to $0.8 million in 2012 compared to $1.0 million in 2011. Depreciation expense for capital assets remained consistent at $0.2 million.

Finance income remained at $0.1 million in the first quarter of 2012, as in the first quarter of 2011. The finance costs, consisting mainly of banking charges, have increased slightly in the first quarter of 2012.

In the first quarter, the Company reported a foreign exchange gain of $0.1 million which was consistent with the gain reported in the comparative period of 2011. 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 Income/Loss

The Company reported a net loss of $2.7 million for the quarter compared to $2.2 million last year. This decline was driven mainly by decreased sales and increased expenses.

Notice to Reader

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, 2012 and March 31, 2011 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. Revenue in 2011 was $82 million. Additional information is available at http://www.mcgrawhill.ca.

McGraw-Hill Ryerson Limited STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (in thousands of dollars except per share data) (unaudited) Three months ended March 31 2012 2011 $ $ ---------------------------------------------------------------------------- Sales revenue, less returns 7,693 8,366 Other income 127 177 Rental income 115 151 ---------------------------------------------------------------------------- Total revenue 7,935 8,694 Cost of goods sold 2,658 2,823 ---------------------------------------------------------------------------- Gross profit 5,277 5,871 Operating expenses 7,967 7,659 Amortization - pre-publication costs 827 1,030 Depreciation - property, plant and equipment 216 235 ---------------------------------------------------------------------------- Operating loss (3,733) (3,053) Finance income 107 131 Finance costs (36) (28) Foreign exchange gain 53 69 ---------------------------------------------------------------------------- Loss before income taxes (3,609) (2,881) Income tax recovery (865) (689) ---------------------------------------------------------------------------- Net loss and comprehensive loss for the period attributable to equity holders of the Company (2,744) (2,192) ---------------------------------------------------------------------------- Loss per share Basic and diluted ($1.37) ($1.10) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- McGraw-Hill Ryerson Limited STATEMENTS OF FINANCIAL POSITION (in thousands of dollars) (unaudited) As at March 31, December 31, March 31, 2012 2011 2011 $ $ $ ---------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 31,611 41,926 35,519 Marketable securities 755 716 879 Trade and other receivables, net 2,841 11,429 1,927 Inventories, net 8,885 6,123 8,699 Due from parent and affiliated companies 6,837 1,925 4,721 Income taxes receivable 2,600 - 2,748 Prepaid expenses and other assets 850 280 766 ---------------------------------------------------------------------------- Total current assets 54,379 62,399 55,259 ---------------------------------------------------------------------------- Property, plant and equipment, net 13,858 14,071 14,514 Intangible assets 16,715 16,439 18,170 Deferred tax assets - 494 - ---------------------------------------------------------------------------- Total non-current assets 30,573 31,004 32,684 ---------------------------------------------------------------------------- 84,952 93,403 87,943 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- LIABILITIES AND EQUITY Current liabilities Trade and other payables 7,472 11,122 8,908 Income taxes payable - 713 - Due to parent and affiliated companies 3,285 4,784 950 ---------------------------------------------------------------------------- Total current liabilities 10,757 16,619 9,858 ---------------------------------------------------------------------------- Employee future benefits 2,349 2,281 2,533 Long-term payable - 44 267 Deferred tax liabilities 581 - 351 ---------------------------------------------------------------------------- Total liabilities 13,687 18,944 13,009 ---------------------------------------------------------------------------- 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 821 702 436 Retained earnings 68,447 71,760 72,501 ---------------------------------------------------------------------------- Total equity 71,265 74,459 74,934 ---------------------------------------------------------------------------- 84,952 93,403 87,943 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- McGraw-Hill Ryerson Limited STATEMENTS OF CHANGES IN EQUITY (in thousands of dollars) (unaudited) Share Paid-in Retained capital capital earnings Total $ $ $ $ ---------------------------------------------------------------------------- Balance, December 31, 2010 1,997 372 75,232 77,601 Dividends paid ($0.270 per share) - - (539) (539) Additional paid-in capital - 64 - 64 Net loss and comprehensive loss attributable to equity holders of the Company - - (2,192) (2,192) ---------------------------------------------------------------------------- Balance, March 31, 2011 1,997 436 72,501 74,934 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- --------------------------------------------------------------------------- Balance, December 31, 2011 1,997 702 71,760 74,459 Dividends paid ($0.285 per share) - - (569) (569) Additional paid-in capital - 119 - 119 Net loss and comprehensive loss attributable to equity holders of the Company - - (2,744) (2,744) ---------------------------------------------------------------------------- Balance, March 31, 2012 1,997 821 68,447 71,265 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- McGraw-Hill Ryerson Limited STATEMENTS OF CASH FLOWS (in thousands of dollars) (unaudited) Three months ended March 31 2012 2011 $ $ ---------------------------------------------------------------------------- Operating activities Net loss for the period (2,744) (2,192) Add (deduct) charges not affecting cash: Amortization - pre-publication costs 827 1,030 Depreciation - property, plant and equipment 216 235 Decrease in long-term payable (44) (124) Employee future benefits 68 (55) Deferred taxes 1,075 1,163 Net change in non-cash working capital balances related to operations (8,111) (7,289) ---------------------------------------------------------------------------- Cash used in operating activities (8,713) (7,232) ---------------------------------------------------------------------------- Investing activities Investment in pre-publication costs (1,110) (1,002) Investment in property, plant and equipment (3) (119) Increase in financial instruments (39) (47) ---------------------------------------------------------------------------- Cash used in investing activities (1,152) (1,168) ---------------------------------------------------------------------------- Financing activities Dividends paid to shareholders (569) (539) Change in paid-in capital 119 64 ---------------------------------------------------------------------------- Cash used in financing activities (450) (475) ---------------------------------------------------------------------------- Net decrease in cash and cash equivalents (10,315) (8,875) Cash and cash equivalents, beginning of period 41,926 44,394 ---------------------------------------------------------------------------- Cash and cash equivalents, end of period 31,611 35,519 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

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


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