McGraw-Hill Ryerson Reports Second Quarter Results

Stock Symbol: MHR

WHITBY, ON, July 30 /CNW/ -

    
    Three Months to June 30, 2010 ($000)                     2010       2009
    -----------------------------

    Sales, less returns                                   $15,754    $18,027
    Other                                                     477        422
                                                          --------   --------
    Total revenue                                         $16,231    $18,449

    Net Income                                            $   386    $ 1,037
    Net Income per share                                  $  0.19    $  0.52

    Six Months to June 30, 2010 ($000)
    ---------------------------

    Sales, less returns                                   $24,074    $25,876
    Other                                                     695        732
                                                          --------   --------
    Total revenue                                         $24,769    $26,608

    Net Loss                                              $(2,112)   $(1,644)
    Net Loss per share                                    $ (1.06)   $ (0.82)
    

Summary

The Company generally reports a modest net income result for the second quarter as sales are more heavily weighted to the second half of the year. For the second quarter in 2010, net income is $0.4 million, lower than the $1.0 million in the second quarter of last year as a result of lower sales.

Three Months Ended June 30, 2010

Sales of $15.8 million decreased 12.0% compared to prior year, as a result of a decrease in sales in the School and Professional Divisions.

The Higher Education Division reported sales of $8.8 million, consistent with the prior year's $8.7 million.

The School Division sales of $5.2 million decreased from the prior year's second quarter sales of $7.5 million. This decline was driven mostly by decreased orders from provinces in Western Canada.

The Professional Division produced sales of $1.5 million, down $0.2 million from last year.

Cost of product and royalties decreased to $5.8 million from $6.8 million in the prior year, in line with the sales decrease.

Income before tax was $0.6 million compared to $1.3 million in the second quarter last year, mainly the result of the decrease in sales.

Six Months Ended June 30, 2010

Total revenue of $24.8 million decreased by 6.9% compared to the prior year's result of $26.6 million, again driven by a decline in sales in the School and Professional Divisions.

Higher Education Division sales increased by 4.4% to $12.9 million from $12.3 million in the corresponding period of the prior year. This division has had very positive market feedback to the introduction of its locally-developed Connect teaching and learning platform. Connect is an on-line study guide/assessment tool/homework manager that is sold in conjunction with many of the Division's titles.

School Division sales decreased by 19.7% to $8.1 million compared to $10.1 million in 2009. The decrease is mainly the result of fewer orders from school boards in Alberta and British Columbia. The year-to-date sales decline is consistent with industry-wide sales results, as provided by the Canadian Educational Resources Council (CERC).

Professional Division sales decreased by $0.3 million to $2.8 million in 2010 compared to $3.1 million during the corresponding period of last year. This is mainly the result of reduced orders from several retailers.

Cost of product and royalties decreased by 10.9% to $9.1 million. This decline is consistent with the lower sales results. Cost of product and royalties as a percentage of sales showed a minor improvement (39.5% last period, 37.8% this period), driven mainly by a change in mix of products sold.

Year to date loss before income tax was $2.9 million, compared to a loss of $2.4 million in the corresponding period of last year. This variance was caused by the decrease in sales.

    
                               Notice to Reader
                               ----------------
           The attached financial statements have been prepared by
     management of McGraw-Hill Ryerson Limited. The financial statements
       for the three and six month periods ended June 30, 2010 and 2009
                  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 2009 was $88 million. Additional information is available at http://www.mcgrawhill.ca.

    
    McGRAW-HILL RYERSON LIMITED

                               BALANCE SHEETS
                               --------------
                                 (unaudited)

    (In thousands of dollars)

                                                  June   December       June
    As at                                     30, 2010   31, 2009   30, 2009
    -------------------------------------------------------------------------

    ASSETS
    Current
      Cash                                     $19,677    $35,878    $13,139
      Marketable securities                        728        821        773
      Accounts receivable                        7,593     11,319     11,427
      Due from parent and affiliated companies   3,611      2,564      3,387
      Inventories                                9,084      6,052     10,496
      Prepaid expenses and other assets          1,107        318      1,283
      Income taxes recoverable                   6,047      2,368      5,572
      Future tax assets                            767      2,117      1,098

    -------------------------------------------------------------------------

      Total current assets                      48,614     61,437     47,175

    -------------------------------------------------------------------------

      Capital assets, net                       14,838     15,182     15,462
      Other assets, net                         19,352     19,411     17,932

    -------------------------------------------------------------------------

      Total assets                             $82,804    $96,030    $80,569
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES & SHAREHOLDERS' EQUITY
    Current
      Accounts payable and accrued charges      $8,343      9,862      7,202
      Due to parent and affiliated companies     1,885      5,998      3,324

    -------------------------------------------------------------------------

      Total current liabilities                 10,228     15,860     10,526
    -------------------------------------------------------------------------

      Employee future benefits                   2,088      2,038      2,076
      Future tax liabilities                     1,282        774        531

    -------------------------------------------------------------------------

      Total liabilities                         13,598     18,672     13,133

    -------------------------------------------------------------------------

    Shareholders' equity
      Share capital
        Authorized - 5,000,000 common shares
        Issued and outstanding - 1,996,638
         common shares                           1,997      1,997      1,997
      Retained earnings                         67,209     75,361     65,439

    -------------------------------------------------------------------------

      Total shareholders' equity                69,206     77,358     67,436

    -------------------------------------------------------------------------

      Total liabilities and shareholders'
       equity                                  $82,804    $96,030    $80,569

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



        STATEMENTS OF INCOME (LOSS), COMPREHENSIVE INCOME (LOSS) AND
        ------------------------------------------------------------
                              RETAINED EARNINGS
                              -----------------
                                 (unaudited)

    (In thousands of dollars except per share data)

                                    Three months ended     Six months ended
                                           June 30               June 30
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------
    Revenue
      Sales, less returns           $15,754    $18,027    $24,074    $25,876
      Other                             477        422        695        732

    -------------------------------------------------------------------------

    Total revenue                    16,231     18,449     24,769     26,608

    -------------------------------------------------------------------------

    Expenses
      Cost of product and
       royalties                      5,849      6,817      9,109     10,222
      Editorial, selling, general
       and administrative             7,632      8,177     15,411     15,754
      Amortization - prepublication
       costs                          1,819      1,770      2,594      2,316
      Amortization - capital assets     241        327        476        655
      Employee future benefits           25         25         50         50
      Foreign exchange loss              26         10         68         50

    -------------------------------------------------------------------------

    Total expenses                   15,592     17,126     27,708     29,047

    -------------------------------------------------------------------------

    Income (loss) before income
     taxes                              639      1,323     (2,939)    (2,439)

    -------------------------------------------------------------------------

    Provision for (recovery of)
     income taxes
      Current                           (89)      (800)    (2,685)    (3,114)
      Future                            342      1,086      1,858      2,319

    -------------------------------------------------------------------------

                                        253        286       (827)      (795)

    -------------------------------------------------------------------------

    Net income (loss) and
     comprehensive income (loss)
     for the period                     386      1,037     (2,112)    (1,644)

    Retained earnings, beginning of
     period                          67,362     64,911     75,361     68,072
    Dividends paid to shareholders
     ($3.025 per share; 2009 -
     $0.495 per share)                 (539)      (509)    (6,040)      (989)

    -------------------------------------------------------------------------

    Retained earnings, end of
     period                         $67,209    $65,439    $67,209    $65,439

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings (loss) per common
     share

      Basic - net income (loss)
       for the period               $  0.19    $  0.52    $ (1.06)   $ (0.82)

      Diluted - net income (loss)
       for the period               $  0.19    $  0.52    $ (1.06)   $ (0.82)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average number of common shares for basic and diluted income
    (loss) per common share for 2010 and 2009 is 1,996,638.



                           STATEMENTS OF CASH FLOW
                           -----------------------
                                 (unaudited)

    (In thousands of dollars)

                                    Three months ended     Six months ended
                                           June 30               June 30
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
      Net income (loss) for the
       period                       $   386    $ 1,037    $(2,112)   $(1,644)
      Add/(deduct) items not
       affecting cash:
        Amortization -
         prepublication costs         1,819      1,770      2,594      2,316
        Amortization - capital
         assets                         241        327        476        655
        Employee future benefits         25         25         50         50
        Future income taxes             342      1,086      1,858      2,319
      Net change in non-cash working
       capital balances related to
       operations                    (6,873)   (11,233)   (10,415)   (14,891)

    -------------------------------------------------------------------------

    Cash used in operating
     activities                      (4,060)    (6,988)    (7,549)   (11,195)

    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
      Prepublication costs           (1,332)    (2,070)    (2,573)    (3,715)
      Additions to capital assets       (31)       (36)      (132)       (69)
      Increase (decrease) in
       investments                       88          2         93        (97)

    -------------------------------------------------------------------------

    Cash used in investing
     activities                      (1,275)    (2,104)    (2,612)    (3,881)

    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
      Dividends paid to shareholders   (539)      (509)    (6,040)   (14,965)

    -------------------------------------------------------------------------

    Cash used in financing activities  (539)      (509)    (6,040)   (14,965)

    -------------------------------------------------------------------------

    Net decrease in cash during the
     period                          (5,874)    (9,601)   (16,201)   (30,041)
    Cash, beginning of period        25,551     22,740     35,878     43,180

    -------------------------------------------------------------------------

    Cash, end of period             $19,677    $13,139    $19,677  $  13,139

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow
     information
      Income taxes refunded         $     -    $     -    $   781  $      50
      Income taxes paid             $   455    $ 1,363    $ 1,806  $   2,949
    -------------------------------------------------------------------------
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SOURCE News - Media

For further information: For further information: Gordon Dyer, Executive Vice President and Chief Financial Officer, (905) 430-5032, http://www.mcgrawhill.ca

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