Ms. Brenda Arseneault reports
MCGRAW-HILL RYERSON REPORTS 2012 ANNUAL RESULTS
McGraw-Hill Ryerson Ltd. has released its results for the year ended Dec. 31, 2012.
(in thousands of dollars)
Three months to Dec. 31,
Sales, less returns $ 18,931 $ 20,086
Other 3,130 527
Rental 182 134
Total revenue $ 22,243 $ 20,747
Net income 4,440 2,645
Net income per share $ 2.22 $ 1.32
12 months to Dec. 31,
Sales, less returns $ 72,258 $ 78,953
Other 4,283 2,496
Rental 541 583
Total revenue $ 77,082 $ 82,032
Net income 8,145 8,757
Net income per share $ 4.08 $ 4.39
The company's sales revenue, less returns, decreased by 8.5 per cent in 2012, with sales of $72.3-million, compared with $79-million in 2011.
The higher education division experienced a decrease in overall revenue of 6.4 per cent compared with 2011, driven by a decline in sales of print, partially offset by strong growth in digital solutions. Higher education continued its industry leadership in the technology-enabled evolution of education with the success of McGraw-Hill Connect, the e-book and on-line homework solution, and the LearnSmart Advantage suite of adaptive learning solutions. Industrywide sales in this sector declined 2.3 per cent according to the Canadian Publishers' Council data.
The school division's sales decreased by 9.7 per cent compared with the previous year. The decline in revenue from the Canadian publishing program is a function of non-repeating 2011 sole source contracts and industrywide sales declines, the result of slow release of new curriculum and financing in Ontario. Industry sales declined by 6.7 per cent relative to 2011 (based on Canadian Education Resource Council data).
Professional division sales declined by 21.8 per cent in 2012 compared with 2011. The decline in sales was partly the result of continuing transition to e-book sales, with lower unit revenue, and to particularly high returns in some print product categories. Digital sales again grew strongly in 2012 and are expected to continue to perform well as market demand shifts from print to digital content.
Cost of goods sold decreased to $26.8-million in 2012 from $29.5-million in 2011. Margins on sales improved as a result of a change in product mix compared with last year.
Operating expenses remained consistent at $30.2-million in 2012. There were reductions in promotion and compensation expenses that were offset by a restructuring charge of $1.1-million. This restructuring will improve the expense base of the company to better suit the company's growing focus on digital learning solutions.
Amortization expenses for prepublication costs decreased to $8.5-million in 2012 compared with $9-million in 2011. The decrease is attributable to the delay in government curriculum revisions for the school publishing program. Depreciation expense for capital assets decreased slightly to $800,000 from $900,000 in 2011.
Finance income decreased by $100,000, driven by lower average cash balances in 2012 compared with 2011. Finance costs in 2012, consisting mainly of banking charges, increased by $100,000.
Net income decreased to $8.1-million from $8.8-million last year, mainly driven by the sales decrease.
Cash and cash equivalents decreased to $15.1-million as of Dec. 31, 2012, from $41.9-million in 2011, which is mainly a result of the special dividend payments made during the year. Total dividend payments were $40.3-million in 2012, compared with $12.2-million in 2011. Excluding special dividends, cash and cash equivalents balances increased by $1.2-million in 2012 compared with 2011.
Fourth quarter 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 2012, total revenue increased 7.2 per cent compared with the prior quarter, caused mainly by one-time retroactive copyright income. Higher education sales increased to $15-million from $14.9-million. School division sales decreased $600,000, compared with the fourth quarter of 2011, to $2.6-million. Professional sales decreased $700,000 from $2-million in 2011 as a result of the softening in consumer demand this year. Net income increased by $1.8-million in the fourth quarter compared with the corresponding quarter in 2011, mainly driven by the revenue increase.
The accompanying financial statements should be read in conjunction with the notes to financial statements included in McGraw-Hill Ryerson's annual report.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands of dollars except per share data)
For the years ended
Sales revenue, less returns $ 72,258 $ 78,953
Other income 4,283 2,496
Rental income 541 583
Total revenue 77,082 82,032
Cost of goods sold 26,754 29,470
Gross profit 50,328 52,562
Operating expenses 30,208 30,224
Amortization -- prepublication costs 8,477 9,047
Depreciation -- property, plant and equipment 842 949
Operating income 10,801 12,342
Finance income 323 386
Finance costs (178) (141)
Foreign exchange gain (loss) 282 (88)
Income before income taxes 11,228 12,499
Income tax expense 3,083 3,742
Net income and comprehensive income for the year
attributable to equityholders of the company 8,145 8,757
Earnings per share
Basic and diluted $ 4.08 $ 4.39