MCGRAW-HILL RYERSON LTD. 
By WHITBY, ONTARIO--(Marketwired - Feb 7, 2014) - 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) | |||||
| As at | December 31, 2013 | December 31, 2012 | January 1, 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) | ||||||||
| Share capital | Paid-in capital | Accumulated other comprehensive income | Retained 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 | |||
