Ridley Inc. Reports Financial Results for Fiscal 2014 First Quarter

Ridley Inc. Reports Financial Results for Fiscal 2014 First Quarter 
MANKATO, MINNESOTA -- (Marketwired) -- 11/05/13 -- Ridley Inc.
(TSX:RCL) today reported its financial results for the first quarter
of fiscal 2014, the three months ended September 30, 2013. All
currency amounts are stated in U.S. dollars unless otherwise noted. 
For the three months ended September 30, 2013, Ridley's earnings
before interest, taxes, depreciation and amortization (EBITDA) from
continuing operations were $6.8 million compared to $9.7 million last
year. Net income from continuing operations (net of income tax
expense) for the period was $3.1 million ($0.24 per share) compared
to $5.1 million ($0.40 per share) last year. Consolidated net income
(after income taxes) for the quarter was also $3.1 million ($0.24 per
share) compared to $5.1 million ($0.40 per share) last year. 
Ridley's first quarter fiscal 2014 earnings were largely a reflection
of a return to more normal tonnage volumes compared to the same
period last year when the severe drought across much of the U.S.
reduced forage availability and increased demand for feed
supplementation. Ridley's overall tonnage volumes were thus lower by
5.0% in the first quarter this year, sales revenue of $133.9 million
was lower by 6.4%, and gross profit of $17.8 million was lower by
9.3%. Most of the volume decline relative to last year was
concentrated in the beef cattle sector; however, tonnage volume in
all other animal species showed growth in the first quarter this year
over last year. While earnings in the first quarter of fiscal 2014
were overshadowed by Ridley's strong performance last year, net
income of $3.1 million this year was, except for last year, the
highest on record for any first quarter in the Company's history. 
Net operating expenses, which include selling, administration,
technical services, and research and development of continuing
operations, increased by 8.8% in the first quarter on increased
employee expenses and increased bad debt expense relative to last
year. 
U.S. Feed Operations (USFO) reported a $0.9 million decrease in
operating income for the first quarter this year, largely due to the
drought last year but also higher operating expenses. Ridley Block
Operations (RBO) reported a $1.6 million decrea
se in operating income
from last year, again largely due to the return to more normal
conditions. Ridley Feed Ingredients (RFI) reported operating income
of $0.4 million in the first quarter this year, a decrease of $0.3
million from last year, mainly the effect of lower raw material
prices and increased overhead costs. Ridley's share of its joint
venture interest in Canada, Masterfeeds LP, reported near breakeven
in the three months ended September 30, 2013 reflecting similar
market conditions in Canada as in the United States; however, the
integration of business operations has progressed as expected. 
MANAGEMENT'S DISCUSSION AND ANALYSIS 
This Management's Discussion and Analysis dated as at November 5,
2013 and the accompanying interim consolidated financial statements
for the three months ended September 30, 2013 have been prepared in
accordance with Canadian generally accepted accounting principles
(GAAP) which incorporate International Financial Reporting Standards
(IFRS). 
First Quarter Results  
The following summary data is presented to assist in understanding
the fiscal 2014 first quarter results. 


 
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Summary of Results of Operations                        Three Months Ended  
                                                           September 30     
($000s except for EPS)                                       2013      2012 
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Continuing Operations (i)                                                   
  Revenue                                                 133,921   143,061 
  Gross profit                                             17,771    19,599 
  Operating income                                          5,237     8,084 
  Net income before exceptions                              2,939     5,135 
  Exceptions, net of income taxes (ii)                        131         - 
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  Net income from continuing operations                     3,070     5,135 
  Earnings per share (EPS), from continuing operations       0.24      0.40 
  EBITDA (iii)                                              6,752     9,710 
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Net loss from discontinued operations                           -       (62)
Net income for the period                                   3,070     5,073 
Earnings per share (EPS), basic and diluted                  0.24      0.40 
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 (i)   Continuing Operations excludes the results of the Company's feed     
       manufacturing operations in Canada previously reported as the        
       Canadian Feed Operations (CFO) segment and now comprising            
       discontinued operations.                                             
 (ii)  Exceptions - In the preceding summary data, net income was reported  
       before exceptions. Those exceptions in the three months ended        
       September 30, 2013 were comprised of $0.3 million, net of income     
       taxes, from the gain on the sale of a previously closed facility in  
       Castleton, Indiana, and $0.1 million, net of income taxes, for the   
       asset impairment loss accrued for closure of the Chambersburg,       
       Pennsylvania facility. There were no exceptions in the first three   
       months of last year.                                                 
 (iii) EBITDA - Operating income before depreciation, amortization and      
       exceptions. EBITDA does not have a standardized meaning prescribed by
       GAAP and, therefore, is not readily comparable to similar measures   
       presented by other companies. However, management believes that this 
       measure provides investors with useful supplemental information.     

 
Consolidated First Quarter Results 
Revenue from continuing operations was $133.9 million in the first
quarter of fiscal 2014, a decrease of 6.4% over the same period last
year. Lower revenues were the result of a 5.0% decline in volumes
relative to last year when sales of feed supplements were strongly
influenced by the severe drought, which has since abated. While most
of the volume decline relative to last year was concentrated in the
beef cattle sector, tonnage volume in other animal species less
impacted by forage availability, including dairy cattle, swine and
poultry, showed growth in the first quarter this year over last year.
Raw material prices were also generally lower this year than the same
period last year, which had the effect of reducing average unit
selling prices for the Company's feed products. 
Consolidated gross profit from continuing operations in the first
quarter of fiscal 2014 was $17.8 million compared to $19.6 million in
the same period last year. Most of the $1.8 million decrease in gross
profit was concentrated in the R
BO division where sales in the prior
year were strongly supported by demand for feed supplementation
resulting from drought conditions. Lower volumes and reduced
ingredient gains from last year were largely offset by improved unit
margins in feed supplements this year that followed from improvement
in the availability of commodities and key feed ingredients, which
had been negatively affected by drought last year. 
Operating expenses, which include technical services, selling,
administration expenses and research and development, in continuing
operations were $12.5 million in the first quarter of fiscal 2014
compared to $11.5 million last year. Earnings exceptions in the first
quarter this year, which are also included in operating expenses,
were $0.4 million (pre-tax) for the gain on the sale of the site of
the former Castleton, Indiana facility and $0.2 million (pre-tax) for
the asset impairment loss from the closure of the Chambersburg,
Pennsylvania facility. Excluding exceptions, the increase of $1.2
million in operating expenses of continuing operations over last year
reflects increased employee expenses and higher bad debts expense
relative to last year when the Company recorded a $0.3 million credit
for recovery of a previously written off account. 
Net income from continuing operations, net of income tax expense, for
the first quarter of fiscal 2014 was $3.1 million ($0.24 per share)
compared to $5.1 million ($0.40 per share) in the same period of
fiscal 2013. 
EBITDA is comprised of operating income of continuing operations
before depreciation, amortization and exceptions. For the three
months ended September 30, 2013, EBITDA was $6.8 million compared to
$9.7 million for the same period last year. The decrease of $2.9
million in EBITDA is mainly comprised of the $1.8 million decrease in
gross profit combined with the $1.2 million increase in overhead
expenses. As noted above, exceptions this year relating to the sale
of property and closure of a facility were a net gain of $0.2
million. There were no earnings exceptions in the prior year. 
Discontinued operations are comprised of the Company's feed
manufacturing business in Canada, previously reported as the Canadian
Feed Operations (CFO) segment, which was merged into a limited
partnership with Masterfeeds Inc. in the second quarter of fiscal
2013. Prior period results of CFO have been re-presented here as
discontinued operations. Net loss from discontinued operations in the
first quarter of fiscal 2014 was nil compared to $0.1 million last
year. 
The Company owns a non-controlling interest in the limited
partnership, Masterfeeds LP. Starting with the second quarter of
fiscal 2013, the Company's share of the earnings of Masterfeeds LP is
reported as share of net income or loss of associate, which in the
first quarter of fiscal 2014 was near breakeven. 
Including income from discontinued operations, the Company reported
net income after taxes for the three months ended September 2013 of
$3.1 million ($0.24 per share) compared to $5.1 million ($0.40 per
share) in the same period last year. 
The accompanying interim financial statements reflect the Company's
adoption of IAS 19 "Employee Benefits" which significantly changed
the recognition and measurement of defined benefit pension and
post-retirement expense, and the disclosure of all employee benefits.
Implementation of this standard in the Company's interim consolidated
financial statements required restatement of the fiscal 2013
comparative numbers. In summary, the effects of IAS 19 on previously
reported financial statements for the three months ended September
30, 2012 were: (1) reclassification of $1.5 million from retained
earnings to accumulated other comprehensive income, and (2) a
reduction of net income by $0.2 million ($0.01 per share). The
accompanying notes to the financial statements more fully explain the
reporting changes caused by IAS19r and the retrospective effect on
the Company's previously reported results for fiscal 2013. 
The following table is a reconciliation of EBITDA to net income, the
most closely comparable GAAP measure to EBITDA: 


 
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EBITDA                                                   Three Months Ended 
                                                            September 30    
($000s)                                                      2013      2012 
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Net income for the period                                   3,070     5,073 
Net loss from discontinued operations                           -        62 
Income tax expense                                          1,914     2,820 
Share of net loss of associate                                 18         - 
Finance expense                                               266       394 
Finance income                                                (31)     (265)
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Operating income                                            5,237     8,084 
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Depreciation of property, plant and equipment               1,498     1,431 
Amortization of intangible assets                             234       195 
(Gain) on sale of facilities                                 (420)        - 
Asset impairment loss                                         203         - 
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EBITDA of continuing operations                             6,752     9,710 
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Ridley reports its financial results according to IFRS that have been
incorporated into the Handbook of Canadian Institute of Chartered
Accounts (CICA). However, Ridley has included in its management
discussion and analysis certain non-IFRS financial measures and
ratios that its management believes provide useful information in
measuring the financial performance and financial condition of
Ridley. These measures and ratios do not have a standardized meaning
prescribed by IFRS and, therefore, may not be comparable to similar
measures presented by other public companies, nor should they be
construed as an alternative to other financial measures described by
IFRS. 
Operating income is defined as net income before finance expense,
finance income, income tax expense, share of net income or loss of
associate and net income or loss from discontinued operations.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) is defined as operating income of continuing operations
before depreciation and amortization, gain or loss on sale of
facilities and asset impairment loss. 
Comprehensive Income 
Comprehensive income (loss) is the change in net assets that results
from transactions, events and circumstances from sources other than
investments by and/or distributions to shareholders. Other
comprehensive income (OCI) is comprised of unrealized gains and
losses on
 translation of financial statements of related entities
with foreign functional currency to U.S. dollar reporting currency
and the transition adjustment between retained earnings and
accumulated other comprehensive income related to the adoption of
IAS19r. Comprehensive income in the first quarter of fiscal 2014 was
$3.6 million, which was comprised of net income of $3.1 million, as
reported above, plus unrealized gains of $0.5 million on the
translation of the financial statements of related entities with
foreign functional currency to U.S. currency. 
SEGMENT RESULTS 
In the second quarter of fiscal 2013, the Company modified its
reporting segments to eliminate the Canadian Feed Operations (CFO)
segment following the sale of substantially all of the net assets of
its Canadian operations to Masterfeeds LP. The following is a summary
of operating income (loss) of the reporting segments of the Company's
continuing operations for the first quarter of fiscal 2013 and 2014.
"Corporate" in this presentation includes the consolidating
elimination of intersegment sales and the total assets and property,
plant & equipment associated with discontinued operations. 


 
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Operating Income (Loss)                                  Three Months Ended 
                                                            September 30    
($000s)                                                      2013      2012 
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U.S. Feed Operations (USFO)                                 2,406     3,298 
Ridley Feed Ingredients (RFI)                                 375       649 
Ridley Block Operations (RBO)                               3,215     4,770 
Corporate                                                    (759)     (633)
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Consolidated operating income from continuing operations    5,237     8,084 
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U.S. Feed Operations (USFO) 
The U.S. Feed Operations (USFO) segment consists of twenty-one
full-line production facilities, operating in the United States as
Hubbard Feeds, producing and marketing products for the core animal
nutrition market. USFO plants derive most of their business by
manufacturing and marketing a broad range of complete feeds,
supplements and premixes to meat, milk and egg producers, and owners
of equine and companion animals located mostly in the Midwestern
United States. 
Subsequent to the end of the first quarter, Ridley ceased feed
manufacturing operations at its Chambersburg, Pennsylvania facility.
Customer volume previously served by Chambersburg has been
consolidated with the Company's equine-dedicated feed facility in
Versailles, Kentucky. 
Tonnage volume was lower by 6.1% in the first quarter of fiscal 2014
compared to last year. Volume last year reflected a significant
increase in demand for feed due to the severe drought throughout much
of the United States. Lower volumes this year followed from the
return to a more normal level of demand for feed. 
Gross profits in the first quarter this year were $10.3 million
compared to $10.5 million in the same period last year. Lower volumes
and reduced ingredient gains from last year were largely offset by
improved unit margins in feed supplements this year that followed
from improvement in the availability of commodities and key feed
ingredients, which had been negatively affected by drought last year. 
Operating expenses were higher in the first quarter this year by $0.6
million. The increase in operating expenses this year partly reflects
the allocation of head office administrative costs previously
absorbed by discontinued operations and partly higher employee
expenses. Additionally, operating expenses last year reflected a $0.3
million recovery of a previous bad debt write-off. Operating expenses
this year included a $0.4 million gain on the sale of the site of the
Castleton, Indiana feed manufacturing facility. Also in the first
quarter, USFO discontinued feed manufacturing operations at its
Chambersburg, Pennsylvania facility, which resulted in a $0.2 million
asset impairment loss. 
Operating income for the first quarter of fiscal 2014 was $2.4
million, a decrease of $0.9 million from last year. 
Ridley Feed Ingredients (RFI) 
The Ridley Feed Ingredients (RFI) segment produces and distributes
vitamin and trace mineral premixes, small packaged specialty
products, medicated and non-medicated feed additives and micro feed
ingredients to customers throughout North America from its facility
in Mendota, Illinois. 
Revenue in the first quarter of fiscal 2014, including intersegment
sales, decreased by 3.1% from the same period last year as a result
of lower volumes from last year in sales of feed ingredients,
particularly feed- grade vitamins and amino acids. However, volumes
of higher value-added manufactured products such as vitamin-mineral
premixes and micro-premixes increased over last year resulting in an
overall increase in unit margins. Variations in weather conditions,
such as drought, have a less direct influence on RFI's business. 
Gross profit of $1.5 million in the first quarter this year was lower
by $0.1 million or 4.5% below last year mainly the result of
declining market prices of feed ingredients and increased
manufacturing overhead costs. Operating expenses in the first quarter
increased over the prior year by $0.2 million on generally higher
administrative costs. Operating income for the three months ended
September 30, 2013 was $0.4 million, a decrease of $0.3 million from
last year. 
Ridley Block Operations (RBO) 
The Ridley Block Operations (RBO) segment manufactures a complete
range of block supplements, including low moisture, pressed,
compressed, composite and poured blocks, loose minerals and dried
molasses from eight U.S. facilities. 
RBO's tonnage volume in the first quarter of fiscal 2014 declined by
16.9% from fiscal 2013 as a result of a return to more normal
conditions following severe drought last year. Volume this year is
comparable to volume at the start of the preceding year of fiscal
2012 when market conditions were generally favourable to feed
supplementation. Volume this year also reflects the contribution of
pressed blocks and dried molasses from Stockade Brands, which RBO
acquired at the end of the second quarter of fiscal 2013. 
Gross profits of $6.0 million in the first quarter this year were
lower by $1.5 million from last year primarily reflecting reduced
volumes of low moisture blocks relative to last year when demand was
sustained by severe drought in the beef cattle growing regions of the
United States. Operating expenses in the first quarter of fiscal 2014
were not materially changed from last year; reduced marketing
expenses were largely offset by the allocation of head office
administrative costs previously absorbed by discontinued operations.
Operating income in the first three months of fiscal 2014 was $3.2
million compared to $4.8 million in the same period last year. 
Liquidity/Capital Resources/Cash Flow  
Ridley's net working capital and debt-to-equity positions are
summarized below. 


 
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                           September                    December  September 
Balances as of:                   30  June 30 March 31        31         30 
($000s)                         2013     2013     2013      2012       2012 
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----------------------------------------------------
Net working capital (i)       38,109   34,816   35,704    33,032     49,742 
Net debt (cash surplus)                                                     
 (ii)                         14,607   15,931       85     4,090     16,728 
Equity                       124,516  120,924  138,905   133,902    125,519 
Debt to capitalization                                                      
 ratio (iii)                    11.0%     9.0%     0.3%      9.0%      10.0%
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 (i)   Net working capital is defined as current assets (excluding cash and 
       the current portion of loans receivable) less current liabilities    
       (excluding outstanding cheques in excess of bank balances, short-term
       debt, and the current portion of long-term debt).                    
 (ii)  Net debt (cash surplus) is defined as bank obligations and           
       outstanding cheques in excess of bank balances less cash and short-  
       term deposits. A cash surplus is defined as an excess of cash and    
       short-term deposits over bank obligations.                           
 (iii) Capitalization is debt plus equity.                                  

 
Net working capital balances increased by $3.3 million in the three
months between June 30, 2013 and September 30, 2013. Annual payments
for insurance and the timing of income tax payments accounted for
most of the increase. Inventories were lower by $1.2 million, mainly
the result of more efficient turnover rates of raw materials.
Compared to the same point in time a year ago, working capital
balances were lower by $11.6 million, which is largely accounted for
by the inclusion last year of approximately $12.5 million of working
capital accounts in Canadian Feed Operations prior to its sale to
Masterfeeds LP. 
The following is a summary of cash generated or utilized by business
operations, net of capital expenditures on plant and equipment and
other intangibles, excluding business acquisitions. 


 
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Summary of Changes in Cash Available                     Three Months Ended 
                                                            September 30    
($000s)                                                      2013      2012 
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Cash flow from operating activities                         4,525     7,010 
Net increase in non-cash working capital balances (i)      (2,401)   (6,808)
Increase in loans receivable, net                             (61)     (300)
Proceeds on disposal of property, plant and equipment         755         8 
Capital expenditures, including purchase of intangible                      
 assets                                                    (1,486)   (3,022)
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Increase (decrease) in cash available                       1,332    (3,112)
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 (i)   Includes the change in certain pension and post-retirement           
       liabilities, certain other long-term liabilities, and foreign        
       currency exchange on certain liabilities denominated in Canadian     
       currency.                                                            

 
For the first quarter of fiscal 2014, cash available from operations
net of capital expenditures and business acquisitions and disposals
increased by $1.3 million compared to a decrease of $3.1 million in
the same three-month period last year. Cash flows last year were
negatively affected by delays in the implementation of business
systems that resulted in the accumulation of higher accounts
receivable and accounts payable balances while inventories were
higher last year due to rising raw material prices. 
The Company's borrowing capacity under its loan agreement with U.S.
Bank National Association was unchanged at $50.0 million as at
September 30, 2013. 
Capital Expenditures 
Capital expenditures on property, plant and equipment, and intangible
assets (software) in the first quarter of fiscal 2014 were $1.5
million, compared to $3.0 million in the same period a year ago.
Lower capital expenditures this year reflect discontinuation of
Canadian Feed Operations. 
Investment in Masterfeeds LP 
On November 30, 2012 the Company and Masterfeeds Inc., a wholly-owned
subsidiary of Ag Processing Inc., completed the merger of their
respective livestock and poultry feed and nutrition businesses in
Canada into a new limited partnership called Masterfeeds LP. Each of
Masterfeeds Inc. and Ridley Inc. contributed all of their respective
Canadian feed operating assets and liabilities in exchange for
relative unit holdings in Masterfeeds LP. Ridley retains a
non-controlling equity interest in Masterfeeds LP. 
Starting in the second quarter of fiscal 2013, results of the
Company's Canadian operations up to November 30, 2012 are reported as
net income (loss) from discontinued operations. Pre-tax earnings from
the Company's investment in Masterfeeds LP are reported as share of
net income or loss of associate under the equity method of
accounting, which in the first quarter of fiscal 2014 was near
breakeven. The Company's investment in Masterfeeds LP is reported as
an investment in associate, which as at September 30, 2013 was $17.6
million. As a limited partnership, Masterfeeds LP is not subject to
income taxes - any taxable income is allocated between the respective
partners. 
Outstanding Share Data 
Ridley's share capital consists of an unlimited number of common
shares, with no par value. On December 13, 2012 Ridley received
approval from the Toronto Stock Exchange (the "TSX") to initiate a
normal course issuer bid for the Company's shares through the
facilities of the TSX. The shares repurchase program permits the
Company to purchase for cancellation up to 639,499 of its common
shares over the twelve month period ending December 14, 2013. As at
September 30, 2013 the Company had repurchased no shares under the
current normal course issuer bid. The number of shares outstanding as
at September 30, 2013 and as at November 5, 2013 was 12,789,978. 
Seasonality and Commodity Variability 
The Company experiences seasonal variations in revenue. Historically,
revenue is strongest in the second and third fiscal quarters when
colder weather from October to March typically increases demand for
beef cattle feed. Other product lines are only marginally affected by
seasonal conditions. Certain of the raw materials comprising the
Company's products incorporate commodity-based products and the
by-products of commodity processing. Fluctuating commodity prices may
therefore influence revenues and associated cost of sales as the
Company's selling prices are adjusted to reflect current raw
materials markets. 
Selected Quarterly Financial Information 


 
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                                  Fiscal    First   Second    Third   Fourth
($000s except per share data)       Year  Quarter  Quarter  Quarter  Quarter
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Revenue (i)                         2014  133,921                           
                                    2013  143,061  157,065  144,571  130,053
                                    2012  126,95
4  146,258  136,258  118,260
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Net income before discontinued                                              
 operations and exceptions (ii)                                             
 net of income taxes                2014    2,939                           
                                                                            
                                    2013    5,135    5,689    5,539    1,561
                                    2012    1,729    3,812    4,996      399
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Net income per share (EPS)                                                  
 before discontinued operations                                             
 and exceptions (ii) net of                                                 
 income taxes                       2014     0.24                           
                                                                            
                                    2013     0.40     0.45     0.43     0.12
                                    2012     0.13     0.30     0.39     0.02
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Net income (iii)                    2014    3,070                           
                                    2013    5,073    6,370    5,413    1,647
                                    2012      722    3,950    3,952      328
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Net income per share (EPS)          2014     0.24                           
                                    2013     0.40     0.50     0.42     0.12
                                    2012     0.06     0.31     0.30     0.03
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 (i)   Revenue in the current and prior quarters has been restated to       
       exclude discontinued operations.                                     
 (ii)  Exceptions include asset impairment loss, restructuring charges, and 
       (gain) loss on sale of facilities.                                   
 (iii) Net income in fiscal 2013 and 2014 reflects the Company's adoption of
       IAS19r                                                               

 
Internal Control Over Financial Reporting 
The Chief Executive Officer and Chief Financial Officer have each
signed form "52-109F2 - Certification of Interim Filings" and filed
it with the appropriate securities regulators in Canada in compliance
with National Instrument 52-109: Certification of Disclosure in
Issuers' Annual and Interim Filings issued by the Canadian Securities
Administrators. There has been no change in Ridley's internal
controls over financial reporting or disclosure controls and
procedures that occurred during the most recent interim period that
has materially affected, or is reasonably likely to materially
affect, Ridley's internal control over financial reporting. 
Forward-Looking Information 
This report contains "forward-looking" information. The
forward-looking information includes statements concerning the
proposed transaction described herein, Ridley's outlook for the
future, as well as other statements of beliefs, plans and strategies
or anticipated events, and similar expressions concerning matters
that are not historical facts. Forward-looking information and
statements are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed in,
contemplated or implied by, such statements. These risks and
uncertainties include the risk that the proposed transaction
described herein will not be completed, the ability to make effective
acquisitions and successfully integrate newly acquired businesses
into existing operations, the availability and prices of raw
materials and supplies, livestock disease, product pricing, the
competitive environment and related market conditions, operating
efficiencies, access to capital, the cost of compliance with
environmental and health standards and other regulatory requirements
affecting Ridley's business, adverse results from ongoing litigation,
and actions of domestic and foreign governments. Other risks are
outlined in the Risk Management section of the MD&A included in
Ridley's Annual Report. Unless otherwise required by applicable
securities law, Ridley disclaims any intention or obligation to
publicly update or revise this information, whether as a result of
new information, future events or otherwise. Ridley cautions readers
not to place undue reliance upon forward-looking statements. 
OUTLOOK 
Ridley's business is sensitive to any changes in the economic
environment for livestock and poultry producers and animal
populations. Generally, most sectors of livestock and poultry
production in North America are operating profitably at the current
time. The drought in much of the Midwestern United States, which was
severe at the start of Ridley's previous fiscal year, has since
abated and is not a driver for feed volumes and prices in the current
fiscal year. In much of Ridley's trading area in the Midwest there is
an abundance of forage supplies for livestock producers and improved
grain crops. Seasonal weather conditions will be an important
determinant of tonnage volumes for the beef cattle sector heading
into the winter months of Ridley's second and third fiscal quarters.
Ridley's full product range for a diversity of animal species,
including beef and dairy cattle, swine, equine and poultry, will help
to provide resilience against uncertain producer economics. 
Grain prices have decreased significantly in recent months, which
will be beneficial to the economic prospects of producers and a
positive influence for the rebuilding of herd populations. However,
lower commodity prices in the coming year would be a negative factor
for Ridley's unit margins. Market prices for feed ingredients, which
generally move in tandem with commodities, directly impact the value
of Ridley's raw materials inventories and the margin between
ingredient cost and market driven prices realized on the sale of
finished feed products. Consequently, the potential for continuing
volatility in feed ingredient prices and the abundance of livestock
forage in much of the Midwest will be amongst the more significant
drivers of Ridley's results in fiscal 2014. 
Ridley Inc., headquartered in Mankato, Minnesota, is one of North
America's leading commercial animal nutrition companies. Ridley
employs approximately 700 people in the manufacture, sales and
marketing of a full range of animal nutrition products under highly
regarded trade names. Ridley's common shares are listed on The
Toronto Stock Exchange (trading symbol: RCL). Additional information,
including the notes to the interim financial statements and Ridley's
Annual Information Form (AIF), are available at www.sedar.com. Visit
our website at www.ridleyinc.com. 


 
CONSOLIDATED BALANCE SHEETS                                                 
(Expressed in thousands of U.S. dollars) (unaudited)                        
                                                September         September 
                                                       30 June 30        30 
                                           Note      2013    2013      2012 
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ASSETS                                                                      
Current assets                                                              
  Cash                                              5,097     329     1,678 
  Accounts receivable                              25,955  25,133    50,569 
  Inventories                        
         7    40,778  41,978    51,191 
  Income taxes recoverable                            749       -         - 
  Prepaid and other current assets                  1,935     841     2,458 
  Current portion of loans receivable                 408     355     1,071 
----------------------------------------------------------------------------
Total current assets                               74,922  68,636   106,967 
Non-current assets                                                          
  Loans receivable                                     72      64       389 
  Assets-held-for-sale                        9       200     330       330 
  Property, plant and equipment                    63,724  64,188    71,072 
  Deferred income tax asset                         7,617   7,407     8,880 
  Investment in associate                    11    17,579  17,218         - 
  Intangible assets                                 8,474   8,676     7,267 
  Goodwill                                         38,928  38,928    37,982 
----------------------------------------------------------------------------
Total non-current assets                          136,594 136,811   125,920 
----------------------------------------------------------------------------
TOTAL ASSETS                                      211,516 205,447   232,887 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
LIABILITIES and SHAREHOLDERS' EQUITY                                        
Current liabilities                                                         
  Outstanding cheques in excess of bank                                     
   balances                                         4,328   4,234     4,477 
  Accounts payable and accrued liabilities         30,617  30,676    53,122 
  Advances from customers                             691     667       486 
  Income taxes payable                                  -   1,793       868 
  Current portion of long-term debt                     -       -        60 
----------------------------------------------------------------------------
Total current liabilities                          35,636  37,370    59,013 
Non-current liabilities                                                     
  Long-term debt                                   15,376  12,026    13,869 
  Deferred income tax liability                    16,939  16,989    16,973 
  Other accrued liabilities                         1,286   1,028       423 
  Post-employment benefit obligations              17,763  17,110    17,090 
----------------------------------------------------------------------------
Total non-current liabilities                      51,364  47,153    48,355 
----------------------------------------------------------------------------
Total liabilities                                  87,000  84,523   107,368 
----------------------------------------------------------------------------
                                                                            
Shareholders' equity                                                        
Share capital                                13    53,159  53,159    53,159 
Retained earnings                                  69,967  66,897    72,511 
Accumulated other comprehensive income (loss)       1,390     868      (151)
----------------------------------------------------------------------------
                                                   71,357  67,765    72,360 
----------------------------------------------------------------------------
Total shareholders' equity                        124,516 120,924   125,519 
----------------------------------------------------------------------------
TOTAL LIABILITIES and SHAREHOLDERS' EQUITY        211,516 205,447   232,887 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Refer to accompanying notes to the interim consolidated financial
statements. Certain prior year figures have been restated as required
by IAS 19r - See Note 5. 


 
Approved by the Board of Directors                                          
                                                                            
                                                                            
(signed)  B. P. Martin, Director       (signed)  W. Harden, Director        
                                                                            
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS                     
(Expressed in thousands of U.S. dollars) (unaudited)                        
                                                        Three Months Ended  
                                                           September 30     
                                                      ----------------------
                                                  Note      2013       2012 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue                                                  133,921    143,061 
Cost of sales                                        7   116,150    123,462 
----------------------------------------------------------------------------
Gross profit                                              17,771     19,599 
----------------------------------------------------------------------------
Operating (income) expenses                                                 
Technical services, selling and administrative            12,655     11,674 
Other expense (income)                                        10       (315)
Gain on sale of facilities                           9      (420)         - 
Research and development                                      86        156 
Asset impairment                                     9       203          - 
----------------------------------------------------------------------------
Net operating expenses                                    12,534     11,515 
----------------------------------------------------------------------------
Operating income                                           5,237      8,084 
Share of net loss of associate                      11       (18)         - 
Finance expense                                             (266)      (394)
Finance income                                                31        265 
----------------------------------------------------------------------------
Income before income taxes                                 4,984      7,955 
Income tax expense                                  12     1,914      2,820 
----------------------------------------------------------------------------
Net income from continuing operations                      3,070      5,135 
Net loss from discontinued operations               10         -        (62)
Net income for the period                                  3,070      5,073 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Retained earnings, beginning of period                    66,897     67,438 
Net income for the period                                  3,070      5,073 
----------------------------------------------------------------------------
Retained earnings, end of period                          69,967     72,511 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net income per share from continuing operations, basic                      
 and diluted   
                                             0.24       0.40 
Net income per share from discontinued operations,                          
 basic and diluted                                             -          - 
Net income per share, basic and diluted                     0.24       0.40 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Refer to accompanying notes to the interim consolidated financial
statements. Certain prior year figures have been restated as required
by IAS 19r - See Note 5. 


 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)                      
(Expressed in thousands of U.S. dollars) (unaudited)      Three Months Ended
                                                                September 30
                                                              2013      2012
----------------------------------------------------------------------------
Net income for the period                                    3,070     5,073
Items that will not be                                                      
 reclassified to net income:                                                
Transition adjustment related                                               
 to the adoption of IAS 19r                                      -       184
Items that may be reclassified                                              
 to net income:                                                             
Unrealized gain on translation                                              
 of financial                                                               
statements of related entities                                              
 with foreign functional                                                    
currency to U.S. dollar                                                     
 reporting currency                                            522       940
----------------------------------------------------------------------------
Other comprehensive income for the                                          
 period                                                        522       940
Comprehensive income for the                                                
 period                                                      3,592     6,197
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                                
(Expressed in thousands of U.S. dollars) (unaudited)                        
                                                       Accumulated          
                                                             other          
                                      Share Retained comprehensive     Total
                               Note capital earnings          loss    Equity
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at June 30, 2012             53,159   67,438        (1,275)  119,322
----------------------------------------------------------------------------
                                                                            
Change in currency translation            -        -           940       940
Net income for the period                 -    5,073             -     5,073
Transition adjustment related                                               
 to the                                                                     
adoption of IAS 19r               5       -        -           184       184
----------------------------------------------------------------------------
                                                                            
Balance at September 30, 2012    13  53,159   72,511          (151)  125,519
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
                                                                            
                                                       Accumulated          
                                                             other          
                                      Share Retained comprehensive     Total
                               Note capital earnings        income    Equity
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at June 30, 2013             53,159   66,897           868   120,924
----------------------------------------------------------------------------
                                                                            
Change in currency translation            -        -           522       522
Net income for the period                 -    3,070             -     3,070
----------------------------------------------------------------------------
                                                                            
Balance at September 30, 2013    13  53,159   69,967         1,390   124,516
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Accumulated other comprehensive income is comprised of the unrealized
loss on translation of financial statements of related entities with
foreign functional currency to U.S. dollar reporting currency and the
transition adjustment between retained earnings and accumulated other
comprehensive income related to the adoption of IAS19r (see Note 5). 
Refer to accompanying notes to the interim consolidated financial
statements. Certain prior year figures have been restated as required
by IAS 19r - See Note 5. 


 
CONSOLIDATED STATEMENTS OF CASH FLOWS                                       
(Expressed in thousands of U.S. dollars) (unaudited)                        
                                                         Three Months Ended 
                                                            September 30    
                                                        --------------------
                                                   Notes     2013      2012 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flow from operating activities                                         
Net income for the period                                   3,070     5,073 
Add (deduct) items not affecting cash:                                      
  Depreciation of property, plant and equipment             1,498     1,701 
  Deferred income taxes                                       (96)        - 
  Asset impairment loss                                9      203         - 
  Share of net loss of associate                      11       18         - 
  Loss on sale of property, plant and                                       
  equipment                                                    13       118 
  Gain on sale of facilities                           9     (420)        - 
  Other amortization                                          233       195 
  Other items not affecting cash                                6       (77)
----------------------------------------------------------------------------
                                                            4,525     7,010 
Net 
change in non-cash working capital and other                            
 balances related to operations:                                            
  Accounts receivable                                        (822)  (17,234)
  Inventories                                               1,200    (3,093)
  Prepaid and other current assets                         (1,094)   (1,317)
  Accounts payable and accrued liabilities                    833    15,880 
  Advances from customers                                      24      (461)
  Income taxes payable and recoverable                     (2,542)     (583)
----------------------------------------------------------------------------
                                                           (2,401)   (6,808)
----------------------------------------------------------------------------
Net cash from operating activities                          2,124       202 
----------------------------------------------------------------------------
Cash flow from investing activities                                         
  Proceeds on disposal of property, plant and                               
  equipment and facilities                                    755         8 
  Purchase of property, plant and equipment                (1,455)   (2,925)
  Purchase of intangible assets                               (31)      (97)
  Increase in loans receivable, net                           (61)     (300)
----------------------------------------------------------------------------
Net cash utilized for investing activities                   (792)   (3,314)
Cash flow from financing activities                                         
  Repayment of short- and long-term debt                   (2,026)   (1,949)
  Proceeds from short- and long-term debt                   5,367     4,829 
----------------------------------------------------------------------------
Net cash from financing activities                          3,341     2,880 
Effect of exchange rate changes on cash                         1       (26)
Increase (decrease) in cash and cash equivalents            4,674      (258)
Cash and cash equivalents - beginning of period            (3,905)   (2,541)
----------------------------------------------------------------------------
Cash and cash equivalents - end of period                     769    (2,799)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents are comprised of:                                 
  Cash                                                      5,097     1,678 
  Outstanding cheques in excess of bank balances           (4,328)   (4,477)
----------------------------------------------------------------------------
                                                              769    (2,799)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Refer to accompanying notes to the interim consolidated financial
statements. Certain prior year figures have been restated as required
by IAS 19r - See Note 5.
Contacts:
Ridley Inc.
Steve VanRoekel
President and CEO
(507) 388-9400 
Ridley Inc.
Gordon Hildebrand
Chief Financial Officer
(507) 388-9577
www.ridleyinc.com
 
 
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