MCGRAW-HILL RYERSON LTD. 
By WHITBY, ONTARIO--(Marketwired - Apr 25, 2014) - McGraw-Hill Ryerson Limited (TSX:MHR)
Attention: Business/Financial Editors
| Three Months to March 31 ($000) | 2014 | 2013 | |
| (unaudited) | |||
| Sales revenue, less returns | $6,884 | $7,387 | |
| Other income | 233 | 302 | |
| Rental income | 138 | 182 | |
| Total Revenue | $7,255 | $7,871 | |
| Net loss | ($3,081) | ($1,805) | |
| Net loss per share | ($ 1.54) | ($ 0.90) |
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 2014, the net loss is $3.1 million, compared to a net loss of $1.8 million in the first quarter of 2013.
Revenue
Total revenue for the first quarter decreased by 7.8% to $7.3 million in 2014 compared to $7.9 million in the corresponding quarter of 2013.
The Higher Education Division sales remained consistent at $4.2 million in the first quarter of 2014 when compared to the first quarter of 2013.
The School Division sales decreased by $0.2 million to $2.0 million in the first quarter of 2014 from $2.2 million in the corresponding quarter of 2013 as a result of non-recurring adoptions in 2013 in Ontario and the Atlantic provinces.
In the Professional Division, sales decreased by $0.3 million in the first quarter of 2014 to $0.8 million due to a decrease in the wholesale market.
Other income, representing billed freight, copyright licensing, commission on foreign sales, and translation fees, decreased in the first quarter of 2014 by 22.8% to $0.2 million from $0.3 million in the corresponding quarter of 2013.
Rental income from the tenant at the Company's Whitby, Ontario facility decreased slightly to $0.1 million in the first quarter of 2014 compared to $0.2 million in the first quarter of 2013 as a result of the lower escalation charges to our tenant.
Expenses
Cost of goods sold decreased by $0.2 million to $2.5 million in the first quarter of 2014 from $2.7 million in the corresponding quarter of 2013 which is consistent with the lower revenues.
Operating expenses increased slightly for the first quarter to $6.5 million compared to $6.4 million for the same quarter in 2013. The increase is a result of increased professional fees.
Amortization expense for pre-publication costs decreased by $0.5 million to $0.3 million in the first quarter of 2014 from $0.8 million in the corresponding quarter of 2013. Depreciation expense for capital assets in the first quarter remained consistent at $0.2 million.
The Company has listed its building located in Whitby, Ontario for sale as of March 31, 2014. The asset has been recorded at market value and an impairment of the asset was recorded for $1.4 million.
Finance income increased $0.03 million as a result of higher cash balances in the first quarter of 2014 than in the first quarter of 2013. Finance costs, consisting mainly of banking charges, in the first quarter of 2014 remained consistent with the same quarter of 2013.
In the first quarter, the Company reported a foreign exchange loss of $0.2 million compared to a $0.1 million loss in the same period of 2013. 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 loss increased to $3.1 million from $1.6 million in the first quarter of 2013, mainly driven by the impairment on asset. Excluding the impact of impairment, net loss of $1.7 million is consistent with 2013.
Cash increased to $21.8 million as of March 31, 2014 from $10.2 million in 2013. This increase was generated from operations.
The Corporation and McGraw-Hill Global Education Holdings, LLC ("McGraw-Hill Education") announced on April 17, 2104 that they have entered into a definitive acquisition agreement pursuant to which McGraw-Hill Education will indirectly acquire all of the outstanding common shares of McGraw-Hill Ryerson that it does not already own at a price of C$50.00 cash per common share. Investmentaktiengesellschaft für langfristige Investoren TGV, owner of approximately 12.5% of the outstanding common shares of McGraw-Hill Ryerson, has separately entered into an agreement with McGraw-Hill Education to vote its shares in favour of the transaction at a special meeting of McGraw-Hill Ryerson shareholders to be held to approve the transaction.
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, 2014 and March 31, 2013 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. Total revenue in 2013 was $71 million. Additional information is available at http://www.mheducation.ca.
| McGraw-Hill Ryerson Limited Incorporated under the laws of Ontario | ||
| STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (unaudited) | ||
| (In thousands of dollars―except per share data) | ||
| Three months ended March 31 | 2014 | 2013 |
| Revenue | ||
| Sales revenue, less returns | 6,884 | 7,387 |
| Other income | 233 | 302 |
| Rental income | 138 | 182 |
| Total revenue | 7,255 | 7,871 |
| Cost of goods sold | 2,495 | 2,668 |
| Gross profit | 4,760 | 5,203 |
| Operating expenses | 6,505 | 6,442 |
| Amortization, net of impairment-pre-publication costs | 330 | 806 |
| Depreciation-property, plant and equipment | 189 | 201 |
| Impairment loss on assets | 1,415 | - |
| Operating loss | (3,679) | (2,246) |
| Finance income | 72 | 37 |
| Finance costs | (46) | (40) |
| Foreign exchange loss | (168) | (71) |
| Loss before income taxes | (3,821) | (2,320) |
| Income tax recovery | (740) | (515) |
| Net loss for the period attributable to equity holders of the Company | (3,081) | (1,805) |
| Other comprehensive income (loss) | ||
| Actuarial gain (loss) on employee future benefits, net of tax | - | 191 |
| Total comprehensive loss for the period attributable to equity holders of the Company | (3,081) | (1,614) |
| Loss per share | ||
| Basic and diluted | ($1.54) | ($0.90) |
| McGraw-Hill Ryerson Limited | ||||
| STATEMENTS OF FINANCIAL POSITION | ||||
| (unaudited) | ||||
| (In thousands of dollars) | ||||
| As at | March 31, 2014 |
December 31, 2013 | March 31, 2013 | |
| Assets | ||||
| Current | ||||
| Cash | 21,789 | 26,370 | 10,235 | |
| Marketable securities | 1,052 | 998 | 859 | |
| Trade and other receivables, net | 1,285 | 8,976 | 2,798 | |
| Inventories, net | 5,550 | 3,312 | 6,913 | |
| Due from parent and affiliated companies | 624 | 559 | 1,088 | |
| Prepaid expenses and other assets | 590 | 401 | 917 | |
| Assets available for sale | 10,750 | - | - | |
| Income taxes receivable | 2,517 | 293 | 2,011 | |
| Total current assets | 44,157 | 40,909 | 24,821 | |
| Property, plant and equipment, net | 414 | 12,757 | 13,266 | |
| Intangible assets | 11,491 | 11,118 | 13,683 | |
| Deferred tax assets, net | 314 | 1,013 | - | |
| Total non-current assets | 12,219 | 24,858 | 26,949 | |
| Total assets | 56,376 | 65,797 | 51,770 | |
| Liabilities and Equity | ||||
| Current | ||||
| Trade and other payables | 8,262 | 10,817 | 7,808 | |
| Realignment payable | 1,264 | 1,776 | - | |
| Due to parent and affiliated companies | 1,070 | 3,709 | 645 | |
| Total current liabilities | 10,596 | 16,302 | 8,453 | |
| Employee future benefits | 1,925 | 1,894 | 2,547 | |
| Long-term payable | 930 | 1,003 | - | |
| Deferred tax liabilities | - | - | 430 | |
| Total non-current liabilities | 2,855 | 2,897 | 2,977 | |
| Total liabilities | 13,451 | 19,199 | 11,430 | |
| 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 | 1,356 | 1,319 | 1,265 | |
| Accumulated other comprehensive income (loss) | 346 | 346 | (122) | |
| Retained earnings | 39,226 | 42,936 | 37,200 | |
| Total equity | 42,925 | 46,598 | 40,340 | |
| Total liabilities and equity | 56,376 | 65,797 | 51,770 | |
| McGraw-Hill Ryerson Limited | |||||
| STATEMENTS OF CHANGES IN EQUITY (unaudited) | |||||
| (In thousands of dollars) | |||||
| Share capital | Paid-in capital | Accumulated other comprehensive income (loss) | Retained earnings | Total | |
| Balance, December 31, 2012 | 1,997 | 1,081 | (122) | 39,603 | 42,559 |
| Dividends paid ($0.30 per share) | - | - | - | (598) | (598) |
| Additional paid-in capital | - | 184 | - | - | 184 |
| Net loss | - | - | - | (1,805) | (1,805) |
| Balance, March 31, 2013 | 1,997 | 1,265 | (122) | 37,200 | 40,340 |
| Balance, December 31, 2013 | 1,997 | 1,319 | 346 | 42,936 | 46,598 |
| Dividends paid ($0.315 per share) | - | - | - | (629) | (629) |
| Additional paid-in capital | - | 37 | - | - | 37 |
| Net Income | - | - | - | (3,081) | (3,081) |
| Balance, March 31, 2014 | 1,997 | 1,356 | 346 | 39,226 | 42,925 |
| McGraw-Hill Ryerson Limited | |||
| STATEMENTS OF CASH FLOWS (unaudited) | |||
| (In thousands of dollars) | |||
| Three months ended March 31 | 2014 | 2013 | |
| Operating Activities | |||
| Net loss for the period | (3,081) | (1,805) | |
| Add (deduct) non-cash items | |||
| Amortization, net of impairment-pre-publication costs | 330 | 806 | |
| Depreciation-property, plant and equipment | 189 | 201 | |
| Impairment loss on assets | 1,415 | - | |
| Decrease in long-term payable | (73) | (350) | |
| Increase in employee future benefits | 30 | 30 | |
| Deferred taxes | 699 | 1,161 | |
| (491) | 43 | ||
| Net change in non-cash working capital balances related to operations | (2,724) | (3,695) | |
| Cash used by operating activities | (3,215) | (3,652) | |
| Investing Activities | |||
| Investment in pre-publication costs | (709) | (741) | |
| Investment in property, plant and equipment | (11) | (44) | |
| Increase in marketable securities | (54) | (60) | |
| Cash used in investing activities | (774) | (845) | |
| Financing Activities | |||
| Dividends paid to shareholders | (629) | (598) | |
| Change in paid-in capital | 37 | 184 | |
| Cash used in financing activities | (592) | (414) | |
| Net decrease in cash during the period | (4,581) | (4,911) | |
| Cash, beginning of period | 26,370 | 15,146 | |
| Cash, end of period | 21,789 | 10,235 | |
