WHITBY, ONTARIO -- (Marketwire) -- 05/06/11 -- McGraw-Hill Ryerson Limited (TSX: MHR) -
Attention: Business/Financial Editors
Three Months to March 31, 2011 ($000) This Year Year Ago
Sales revenue, less returns $ 8,366 $ 8,220
Other 328 312
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Total revenue $ 8,694 $ 8,534
Net Loss (2,192) (2,637)
Net Loss per share $ (1.10) $ (1.32)
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 year. 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 2011, the net loss is $2.2 million, compared to a net loss of $2.6 million in the first quarter of 2010.
Revenue
Total revenue for the first quarter increased by 1.9% to $8.7 million in 2011 compared to $8.5 million in 2010, driven by an increase in sales in both the School Division and the Higher Education Division.
The Higher Education Division sales increased $0.1 million over the first quarter of 2010 to $4.1 million. In this Division, sales in the first quarter of each year generally represent a very small proportion of the annual total. Digital products continue to be a growth area for this Division.
The School Division sales increased $0.2 million to $3.1 million in the first quarter of 2011, from $2.9 million in the corresponding quarter of 2010. This increase was mainly driven by several recent contract wins. Again, sales in the first quarter of each year generally represent a small proportion of the annual total.
In the Professional Division, sales decreased by $0.2 million in the first quarter of 2011 to $1.1 million, from $1.3 million in the comparative period of the prior year. This decrease was caused by reduced orders from several retailers. Sales of hardcopy products have declined industry-wide this year as consumers continue to migrate to e-book offerings.
Other income, representing billed freight, copyright licensing, translation fees and rental revenue from the tenant at the Company's Whitby, Ontario facility increased slightly in the first quarter of 2011 compared to the first quarter of 2010.
Expenses
Cost of goods sold decreased to $2.8 million from $3.3 million last year. Margins on sales improved as a result of lower production costs incurred by the Company, as well as a change in product mix compared to last year's first quarter.
Operating expenses decreased to $7.7 million during the first quarter of 2011 from $8.1 million in the comparative period of the prior year. This decrease was mainly the result of a decrease in overall compensation costs (lower headcount), as well as the timing of certain expenditures which will occur later in this fiscal year.
Amortization expense for pre-publication costs increased to $1.0 million in 2011 compared to $0.7 million in 2010 driven by increases in the Company's pre-publication investment in the Higher Education and School Divisions in recent years. Depreciation expense for capital assets remained consistent at $0.2 million.
Finance income increased by $0.1 million, driven by higher cash balances in 2011 compared to 2010.
Finance costs, consisting mainly of banking charges, remained relatively consistent at $0.03 million.
In the first quarter, the Company reported a foreign exchange gain of $0.07 million, compared to a minor foreign exchange loss in the first quarter of 2010. 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 $2.2 million for the quarter compared to $2.6 million last year. This improvement was driven mainly by decreased expenses and increased margins.
International Financial Reporting Standards ("IFRS")
These financial statements represent the Company's initial presentation of its results and financial position under IFRS. Results for 2010 are also presented using IFRS to allow for comparability.
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, 2011 and March 31, 2010 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 2010 was $81 million. Additional information is available at http://www.mcgrawhill.ca.
STATEMENTS OF FINANCIAL POSITION
(in thousands of dollars)
(unaudited)
March 31, December 31, March 31,
As at 2011 2010 2010
$ $ $
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ASSETS
Current
Cash and cash equivalents 35,519 44,394 25,551
Marketable securities 879 832 816
Trade and other receivables,
net 1,927 9,273 1,623
Inventories, net 8,699 5,370 9,529
Due from parent and
affiliated companies 4,721 1,403 4,013
Income taxes receivable 2,748 - 5,602
Prepaid expenses and other
assets 766 291 934
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Total current assets 55,259 61,563 48,068
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Property, plant and
equipment, net 14,514 14,630 15,048
Intangible assets 18,170 18,205 19,714
Deferred tax assets - 812 -
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Total non-current assets 32,684 33,647 34,762
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87,943 95,210 82,830
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LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 8,908 9,949 9,603
Income taxes payable - 6 -
Due to parent and affiliated
companies 950 4,675 1,821
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Total current liabilities 9,858 14,630 11,424
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Employee future benefits 2,533 2,588 2,564
Long-term payable 267 391 -
Deferred tax liabilities 351 - 10
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Total liabilities 13,009 17,609 13,998
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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 436 372 144
Retained earnings 72,501 75,232 66,691
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Total equity 74,934 77,601 68,832
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87,943 95,210 82,830
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STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(in thousands of dollars except per share data)
(unaudited)
Three months ended March 31
2011 2010
$ $
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Sales revenue, less returns 8,366 8,222
Other income 177 177
Rental income 151 135
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8,694 8,534
Cost of goods sold 2,823 3,260
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Gross profit 5,871 5,274
Operating expenses 7,659 8,072
Amortization - pre-publication costs 1,030 710
Depreciation - property, plant and equipment 235 235
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Operating loss (3,053) (3,743)
Finance income 131 43
Finance costs (28) (39)
Foreign exchange gain (loss) 69 (42)
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Loss before income taxes (2,881) (3,781)
Income tax recovery (689) (1,144)
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Net loss and comprehensive loss for the period,
attributable to equity holders of the Company (2,192) (2,637)
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Loss per share
Basic and diluted ($1.10) ($1.32)
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STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)
Three months ended March 31
2011 2010
$ $
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Operating activities
Net loss for the period (2,192) (2,637)
Add (deduct) charges not affecting cash:
Amortization - pre-publication costs 1,030 710
Depreciation - property, plant and equipment 235 235
Decrease in long-term payable (124) -
Employee future benefits (25) 40
Deferred taxes 1,163 1,534
Net change in non-cash working capital balances
related to operations (7,319) (3,412)
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Cash used in operating activities (7,232) (3,530)
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Investing activities
Investment in Pre-publication costs (1,002) (1,241)
Investment in property, plant and equipment (119) (101)
Decrease (increase) in financial instruments (47) 5
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Cash used in investing activities (1,168) (1,337)
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Financing activities
Dividends paid to shareholders (539) (5,501)
Change in paid-in capital 64 41
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Cash used in financing activities (475) (5,460)
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Net decrease in cash and cash equivalents (8,875) (10,327)
Cash and cash equivalents, beginning of period 44,394 35,878
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Cash and cash equivalents, end of period 35,519 25,551
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Contacts:
McGraw-Hill Ryerson Limited
Gordon Dyer
Executive Vice President and Chief Financial Officer
(905) 430-5032
www.mcgrawhill.ca
