Market Overview

McGraw-Hill Ryerson Reports Third Quarter Results

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WHITBY, ONTARIO--(Marketwire - Oct. 31, 2012) - McGraw-Hill Ryerson Limited (TSX:MHR) -

Attention: Business/Financial Editors



Three Months to September 30 ($000) 2012 2011
(unaudited)
Sales revenue, less returns $ 31.242 $ 34,319
Other income 559 1,393
Rental income 128 152
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Total Revenue $ 31,929 $ 35,864

Net income $ 6,239 $ 7,759
Net income per share $ 3.12 $ 3.89

Nine Months to September 30 ($000) 2012 2011
(unaudited)
Sales revenue, less returns $ 53,326 $ 58,867
Other income 1,153 1,969
Rental income 359 449
-------- --------
Total Revenue $ 54,838 $ 61,285

Net income $ 3,705 $ 6,112
Net income per share $ 1.86 $ 3.06



Summary

The Company's revenues are typically more heavily weighted towards the second half of the calendar year leading up to the beginning of the school year. In the third quarter, McGraw-Hill Ryerson's revenues generally exceed the first two quarters combined. Net income was $6.2 million in the third quarter compared to $7.8 million in the third quarter of 2011 as a result of lower sales. For the nine months ended September 30, 2012, net income was $3.7 million compared to $6.1 million in the first nine months of 2011.

Three Months Ended September 30, 2012

Total revenue for the third quarter decreased by 11.0% to $31.9 million in 2012 compared to $35.9 million in 2011.

The Higher Education Division sales decreased by $2.3 million in the third quarter of 2012 to $22.2 million compared to the third quarter of 2011. This decrease was mainly the result of a reduction in the ratio of bookstore orders to class enrolments. Digital usage and revenues continue to grow but did not make up for downward pressure on print sales in the quarter.

The School Division sales decreased slightly by $0.3 million to $7.8 million in the third quarter of 2012 from $8.1 million in the corresponding quarter of 2011.

In the Professional Division, sales decreased by $0.5 million in the third quarter of 2012 to $1.3 million. Cost of goods sold decreased for the third quarter to $11.7 million when compared to $13.0 million for the same quarter in 2011. The decrease of 10.1% is consistent with the decrease in sales.

Operating expenses decreased for the third quarter to $7.5 million when compared to $7.9 for the same quarter in 2011. The decrease in the third quarter is a result of a shift in promotional expenses to previous quarters in 2012 when compared to the prior year comparable period.

Income before taxes was $8.4 million compared to $10.9 million in the third quarter last year, mainly the result of the decrease in sales.

Nine Months Ended September 30, 2012

Total revenue for the first nine months decreased by 10.5% to $54.8 million in 2012 compared to $61.3 million in 2011.

The Higher Education Division sales decreased $3.4 million to $33.0 million compared to the first nine months of 2011. This decrease was mostly the result of lower bookstore orders, partially offset by growth in digital revenue.

The School Division sales decreased 8.1% to $16.8 million in the first nine months of 2012 from $18.2 million in the corresponding period of 2011. This decrease was mainly driven by nonrecurring orders placed in 2011 by the Atlantic and Western provinces for math resources, along with decreased spending in Ontario.

In the Professional Division, sales decreased by $0.7 million in the first nine months of 2012 to $3.6 million from $4.2 million in the comparative period of the prior year. This decrease was caused by reduced orders and increased returns from retailers. Sales of print products have migrated to e-book offerings where the channel is still being developed.

Cost of goods sold decreased to $19.2 million, for the nine months of 2012, from $21.3 million for the first nine months of 2011, which is consistent with the sales decline.

Operating expenses decreased slightly to $23.2 million during the first nine months of 2012 compared to $23.3 million in the comparative period of the prior year.

Year to date income before taxes was $5.2 million compared to $8.8 million for the same period in 2011. The variance was mainly a reflection of 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 nine month period ended September 30, 2012 and September 30, 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. Total revenue in 2011 was $82 million. Additional information is available at http://www.mcgrawhill.ca.

McGraw-Hill Ryerson Limited



STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands of dollars, except per share data)
(unaudited)

Three months ended Nine months ended
September 30 September 30
2012 2011 2012 2011
$ $ $ $
----------------------------------------------------------------------------
Sales revenue, less returns 31,242 34,319 53,326 58,867
Other income 559 1,393 1,153 1,969
Rental income 128 152 359 449
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Total revenue 31,929 35,864 54,838 61,285
Cost of goods sold 11,681 12,995 19,203 21,312
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Gross profit 20,248 22,869 35,635 39,973
Operating expenses 7,507 7,852 23,245 23,347
Amortization - pre-publication
costs 4,190 3,838 6,929 7,217
Depreciation - property, plant and
equipment 209 237 635 711
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Operating income 8,342 10,942 4,826 8,698
Finance income 30 46 219 266
Finance costs 32 22 98 78
Foreign exchange gain (loss) 96 (103) 270 (91)
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Income before income taxes 8,436 10,863 5,217 8,795
Income tax expense 2,197 3,104 1,512 2,683
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Net income and comprehensive
income for the period
attributable to equity holders of
the Company 6,239 7,759 3,705 6,112
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Income per share
Basic and diluted $ 3.12 $ 3.89 $ 1.86 $ 3.06
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McGraw-Hill Ryerson Limited

STATEMENTS OF FINANCIAL POSITION
(in thousands of dollars)
(unaudited)



As at September 30, December 31, September 30,
2012 2011 2011
$ $ $
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ASSETS
Current
Cash and cash equivalents 26,017 41,926 31,721
Marketable securities 771 716 681
Trade and other receivables, net 16,226 11,429 17,651
Inventories, net 6,104 6,123 6,081
Due from parent and affiliated
companies 501 1,925 2,639
Income taxes receivable 815 - -
Prepaid expenses and other assets 372 280 329
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Total current assets 50,806 62,399 59,102
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Property, plant and equipment, net 13,547 14,071 14,197
Intangible assets 13,345 16,439 15,475
Deferred tax assets 534 494 735
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Total non-current assets 27,426 31,004 30,407
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78,232 93,403 89,509
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LIABILITIES AND EQUITY
Current
Trade and other payables 9,100 11,122 10,033
Income taxes payable - 713 609
Due to parent and affiliated
companies 3,941 4,784 4,025
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Total current liabilities 13,041 16,619 14,667
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Employee future benefits 2,483 2,281 2,415
Long-term payable 8 44 133
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Total liabilities 15,532 18,944 17,215
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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 981 702 613
Retained earnings 59,722 71,760 69,684
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Total equity 62,700 74,459 72,294
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78,232 93,403 89,509
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McGraw-Hill Ryerson Limited

STATEMENTS OF CHANGES IN EQUITY
(in thousands of dollars)
(unaudited)




Share Paid-in Retained
capital capital earnings Total
$ $ $ $
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Balance, December 31, 2010 1,997 372 75,232 77,601
Dividends paid ($5.84 per share) - - (11,660) (11,660)
Additional paid-in capital - 241 - 241
Net income and comprehensive income
attributable to equity holders of the
Company - - 6,112 6,112
----------------------------------------------------------------------------
Balance, September 30, 2011 1,997 613 69,684 72,294
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Balance, December 31, 2011 1,997 702 71,760 74,459
Dividends paid ($7.885 per share) - - (15,743) (15,743)
Additional paid-in capital - 279 - 279
Net income and comprehensive income
attributable to equity holders of the
Company - - 3,705 3,705
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Balance, September 30, 2012 1,997 981 59,722 62,700
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McGraw-Hill Ryerson Limited

STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)



Nine months ended September 30

2012 2011
$ $
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Operating activities
Net income for the period 3,705 6,112
Add (deduct) charges not affecting cash:
Amortization - pre-publication costs 6,929 7,217
Depreciation - property, plant and equipment 635 711
Decrease in long-term payable (36) (258)
Employee future benefits 202 (173)
Deferred taxes (40) 77
Net change in non-cash working capital balances
related to operations (7,825) (10,304)
----------------------------------------------------------------------------
Cash provided by operating activities 3,570 3,382
----------------------------------------------------------------------------

Investing activities
Investment in pre-publication costs (3,849) (4,509)
Investment in property, plant and equipment (111) (278)
Decrease (increase) in marketable securities (55) 151
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Cash used in investing activities (4,015) (4,636)
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Financing activities
Dividends paid to shareholders (15,743) (11,660)
Change in paid-in capital 279 241
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Cash used in financing activities (15,464) (11,419)
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Net decrease in cash and cash equivalents (15,909) (12,673)
Cash and cash equivalents, beginning of period 41,926 44,394
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Cash and cash equivalents, end of period 26,017 31,721
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FOR FURTHER INFORMATION PLEASE CONTACT:
McGraw-Hill Ryerson Limited
Brenda Arseneault
Vice-President and Chief Financial Officer
(905) 430-5223
www.mcgrawhill.ca

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