Ryerson Tull (RYI)

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McGraw-Hill Ryerson Reports First Quarter Results

WHITBY, ONTARIO -- (Marketwire) -- 04/27/12 -- McGraw-Hill Ryerson Limited (TSX:MHR) -

Attention: Business/Financial Editors


Three Months to March 31     ($000)            2012                    2011 
-----------------------------                                               
(unaudited)                                                                 
Sales revenue, less returns                  $7,693                  $8,366 
Other income                                    127                     177 
Rental income                                   115                     151 
                                     --------------          ---------------
Total Revenue                                $7,935                  $8,694 
                                                                            
Net loss                                    ($2,744)                ($2,192)
Net loss per share                           ($1.37)                 ($1.10)

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 2012, the net loss is $2.7 million, compared to a net loss of $2.2 million in the first quarter of 2011.

Revenue

Total revenue for the first quarter decreased by 8.7% to $7.9 million in 2012 compared to $8.7 million in 2011.

The Higher Education Division sales decreased by $0.2 million in the first quarter of 2012 to $3.9 million. Despite this modest decline, digital and custom products continue to be a growth area for this Division.

The School Division sales decreased 13.7% to $2.7 million in the first quarter of 2012, from $3.1 million in the corresponding quarter of 2011. This decrease was mainly driven by nonrecurring orders placed in 2011 by the Atlantic provinces.

In the Professional Division, sales remained consistent in the first quarter of 2012 when compared to the same period in the prior year at $1.1 million.

Other income, representing billed freight, content licensing, and translation fees, decreased as sales have decreased. Rental income from the tenant at the Company's Whitby, Ontario facility decreased slightly in the first quarter of 2012 compared to the first quarter of 2011 as a result of lower rental escalation charges.

Expenses

Cost of goods sold decreased slightly to $2.7 million from $2.8 million in the first quarter of last year, in line with lower sales.

Operating expenses increased to $8.0 million during the first quarter of 2012 from $7.7 million in the comparative period of the prior year, as a result of a shift in promotional expenses from later in the year to the first quarter.

Amortization expense for pre-publication costs decreased to $0.8 million in 2012 compared to $1.0 million in 2011. Depreciation expense for capital assets remained consistent at $0.2 million.

Finance income remained at $0.1 million in the first quarter of 2012, as in the first quarter of 2011. The finance costs, consisting mainly of banking charges, have increased slightly in the first quarter of 2012.

In the first quarter, the Company reported a foreign exchange gain of $0.1 million which was consistent with the gain reported in the comparative period of 2011. 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 $2.7 million for the quarter compared to $2.2 million last year. This decline was driven mainly by decreased sales and increased expenses.

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, 2012 and March 31, 2011 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 2011 was $82 million. Additional information is available at http://www.mcgrawhill.ca.


McGraw-Hill Ryerson Limited                                                 
                                                                            
                 STATEMENTS OF LOSS AND COMPREHENSIVE LOSS                  
              (in thousands of dollars except per share data)               
                                (unaudited)                                 
                                                                            
Three months ended March 31                                                 
                                                          2012         2011 
                                                             $            $ 
----------------------------------------------------------------------------
Sales revenue, less returns                              7,693        8,366 
Other income                                               127          177 
Rental income                                              115          151 
----------------------------------------------------------------------------
Total revenue                                            7,935        8,694 
Cost of goods sold                                       2,658        2,823 
----------------------------------------------------------------------------
Gross profit                                             5,277        5,871 
Operating expenses                                       7,967        7,659 
Amortization - pre-publication costs                       827        1,030 
Depreciation - property, plant and equipment               216          235 
----------------------------------------------------------------------------
Operating loss                                          (3,733)      (3,053)
Finance income                                             107          131 
Finance costs                                              (36)         (28)
Foreign exchange gain                                       53           69 
----------------------------------------------------------------------------
Loss before income taxes                                (3,609)      (2,881)
Income tax recovery                                       (865)        (689)
----------------------------------------------------------------------------
Net loss and comprehensive loss for the period                              
 attributable to equity holders of the Company          (2,744)      (2,192)
----------------------------------------------------------------------------
                                                                            
Loss per share                                                              
Basic and diluted                                       ($1.37)      ($1.10)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
McGraw-Hill Ryerson Limited                                                 
                                                                            
                      STATEMENTS OF FINANCIAL POSITION                      
                          (in thousands of dollars)                         
                                 (unaudited)                                
                                                                            
As at                                      March 31,  December 31, March 31,
                                                2012          2011      2011
                                                   $             $         $
----------------------------------------------------------------------------
ASSETS                                                                      
Current                                                                     
Cash and cash equivalents                     31,611        41,926    35,519
Marketable securities                            755           716       879
Trade and other receivables, net               2,841        11,429     1,927
Inventories, net                               8,885         6,123     8,699
Due from parent and affiliated companies       6,837         1,925     4,721
Income taxes receivable                        2,600             -     2,748
Prepaid expenses and other assets                850           280       766
----------------------------------------------------------------------------
Total current assets                          54,379        62,399    55,259
----------------------------------------------------------------------------
Property, plant and equipment, net            13,858        14,071    14,514
Intangible assets                             16,715        16,439    18,170
Deferred tax assets                                -           494         -
----------------------------------------------------------------------------
Total non-current assets                      30,573        31,004    32,684
----------------------------------------------------------------------------
                                              84,952        93,403    87,943
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND EQUITY                                                      
Current liabilities                                                         
Trade and other payables                       7,472        11,122     8,908
Income taxes payable                               -           713         -
Due to parent and affiliated companies         3,285         4,784       950
----------------------------------------------------------------------------
Total current liabilities                     10,757        16,619     9,858
----------------------------------------------------------------------------
Employee future benefits                       2,349         2,281     2,533
Long-term payable                                  -            44       267
Deferred tax liabilities                         581             -       351
----------------------------------------------------------------------------
Total liabilities                             13,687        18,944    13,009
----------------------------------------------------------------------------
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                                  821           702       436
Retained earnings                             68,447        71,760    72,501
----------------------------------------------------------------------------
Total equity                                  71,265        74,459    74,934
----------------------------------------------------------------------------
                                              84,952        93,403    87,943
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
McGraw-Hill Ryerson Limited                                                 
                                                                            
                      STATEMENTS OF CHANGES IN EQUITY                       
                         (in thousands of dollars)                          
                                (unaudited)                                 
                                                                            
                                       Share   Paid-in  Retained            
                                     capital   capital  earnings      Total 
                                           $         $         $          $ 
----------------------------------------------------------------------------
                                                                            
Balance, December 31, 2010             1,997       372    75,232     77,601 
Dividends paid ($0.270 per share)          -         -      (539)      (539)
Additional paid-in capital                 -        64         -         64 
Net loss and comprehensive loss                                             
 attributable to equity holders of                                          
 the Company                               -         -    (2,192)    (2,192)
----------------------------------------------------------------------------
Balance, March 31, 2011                1,997       436    72,501     74,934 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
--------------------------------------------------------------------------- 
Balance, December 31, 2011             1,997       702    71,760     74,459 
Dividends paid ($0.285 per share)          -         -      (569)      (569)
Additional paid-in capital                 -       119         -        119 
Net loss and comprehensive loss                                             
 attributable to equity holders of                                          
 the Company                               -         -    (2,744)    (2,744)
----------------------------------------------------------------------------
Balance, March 31, 2012                1,997       821    68,447     71,265 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
McGraw-Hill Ryerson Limited                                                 
                                                                            
                          STATEMENTS OF CASH FLOWS                          
                         (in thousands of dollars)                          
                                (unaudited)                                 
                                                                            
Three months ended March 31                                                 
                                                        2012           2011 
                                                           $              $ 
----------------------------------------------------------------------------
Operating activities                                                        
Net loss for the period                               (2,744)        (2,192)
Add (deduct) charges not affecting cash:                                    
  Amortization - pre-publication costs                   827          1,030 
  Depreciation - property, plant and equipment           216            235 
  Decrease in long-term payable                          (44)          (124)
  Employee future benefits                                68            (55)
  Deferred taxes                                       1,075          1,163 
Net change in non-cash working capital                                      
 balances related to operations                       (8,111)        (7,289)
----------------------------------------------------------------------------
Cash used in operating activities                     (8,713)        (7,232)
----------------------------------------------------------------------------
                                                                            
Investing activities                                                        
Investment in pre-publication costs                   (1,110)        (1,002)
Investment in property, plant and equipment               (3)          (119)
Increase in financial instruments                        (39)           (47)
----------------------------------------------------------------------------
Cash used in investing activities                     (1,152)        (1,168)
----------------------------------------------------------------------------
                                                                            
Financing activities                                                        
Dividends paid to shareholders                          (569)          (539)
Change in paid-in capital                                119             64 
----------------------------------------------------------------------------
Cash used in financing activities                       (450)          (475)
----------------------------------------------------------------------------
                                                                            
Net decrease in cash and cash equivalents            (10,315)        (8,875)
Cash and cash equivalents, beginning of period        41,926         44,394 
----------------------------------------------------------------------------
Cash and cash equivalents, end of period              31,611         35,519 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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