Ridley Inc.
TSX : RCL

Ridley Inc.

February 10, 2011 23:33 ET

Ridley Inc. Reports Financial Results for Fiscal 2011 Second Quarter

MANKATO, MINNESOTA and WINNIPEG, MANITOBA--(Marketwire - Feb. 10, 2011) - Ridley Inc. (TSX:RCL) today reported its financial results for the second quarter of fiscal 2011, the three months ended December 31, 2010. All currency amounts are stated in U.S. dollars unless otherwise noted.

For the three months ended December 31, 2010, Ridley earned $4.9 million after income taxes (38 cents per share) compared to $5.0 million (37 cents per share) last year. Earnings before interest, taxes and amortization (EBITA (i)) for the second quarter of fiscal 2011 were $10.0 million compared to $10.2 million last year.

Operating income of $7.8 million in the second quarter of fiscal 2011 was largely in line with results last year as stronger margins, helped by rising raw material prices, offset softer overall volumes while operating expenses remained relatively flat. Ridley's reporting segments were affected in different ways this quarter by developing trends in the economic environment for livestock and poultry producers. Rising cattle prices and an improved outlook for beef producers were favourable to demand for block supplement products which helped Ridley Nutrition Solutions to a 10.7% gain in volume and a 21.0% improvement in operating income to $4.5 million in the second quarter of fiscal 2011. However, continuing economic difficulties for some producers and lower animal numbers negatively impacted the traditional livestock and poultry markets of Ridley Feed Operations, which recorded a 23.9% decline in operating income to $3.2 million in the second quarter. Ridley Feed Ingredients contributed $0.9 million to operating income this quarter, about the same as last year, on a 3.4% improvement in gross profit from a higher value-added product mix. Animal numbers remain below the levels of prior years, and sharply higher prices for feed grains and other raw materials will likely moderate the profitability of Ridley's customers in most sectors of livestock and poultry production.

Ridley Inc. will adopt International Financial Reporting Standards (IFRS) starting in fiscal 2012 and will include in its financial statements for the first quarter ended September 30, 2011 an opening transition balance sheet that recognizes the differences in financial reporting between IFRS and Canadian Generally Accepted Accounting Principles, which the current financial statements are based upon. In the MD&A that follows, Ridley has disclosed the expected dollar impact that conversion to IFRS will have upon certain balance sheet items. These changes in presentation have no effect on the Company's results for the current year but financial statements starting in fiscal 2012 will include comparative figures for fiscal 2011 restated on the basis of IFRS. The reader is directed to the MD&A for further information concerning the adoption of IFRS and the effect on Ridley's reported results.

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following Management Discussion and Analysis as of February 10, 2011 is based on the accompanying financial statements prepared using Canadian Generally Accepted Accounting Principles ("GAAP"). All amounts are in U.S. dollars unless otherwise stated.

Second Quarter Results

The following summary data is presented to assist in understanding the fiscal 2011 second quarter results:

  Three months ended Six months ended
Summary of Results December 31 December 31
($ million except for EPS) 2010 2009 2010 2009
Revenue $ 159.3 $ 150.0 $ 286.9 $ 285.7
Gross profit   23.7   23.5   41.0   40.9
Operating income   7.8   8.1   10.4   10.4
Net earnings   4.9   5.0   6.4   6.1
Diluted earnings per share (EPS) $ 0.38 $ 0.37 $ 0.50 $ 0.45
EBITA (i)   10.0   10.2   14.7   14.6

(i) EBITA – Operating income before amortization and exceptions. EBITA does not have a standardized meaning prescribed by Canadian 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 Second Quarter Results

Revenue of $159.3 million in the second quarter of fiscal 2011 was $9.3 million higher than the same period last year. A comparison of revenue is not necessarily indicative of the strength of Ridley's business because revenue can be influenced by fluctuating commodity prices. Although sales volume, as measured in tons of feed products sold, was 2.8% lower than the prior year, average unit selling prices were higher this year as a result of increasing raw material costs and the Company's continuing focus on higher value-added products. The decline in volume was concentrated in the Ridley Feed Operations (RFO) segment where complete feed volumes have been sensitive to lower animal numbers and higher feed prices, particularly in the swine sector and the Canadian beef sector.

Consolidated gross profit in the second quarter of fiscal 2011 was $23.7 million compared to $23.5 million in the same period of fiscal 2010. Ridley Nutrition Solutions contributed an increase of $0.9 million in gross profits in the quarter on improved volumes of block supplementation products. However, lower volumes in RFO reduced gross profits by $0.7 million. RFI recorded slightly higher gross profits this quarter on an improved product mix.

Operating expenses, which include selling, general and administrative expenses as well as amortization of property, plant and equipment, were $15.9 million in the second quarter of fiscal 2011 compared to $15.5 million last year.

EBITA is comprised of operating income before amortization and exceptions. For the three months ended December 31, 2010 EBITA was $10.0 million compared to $10.2 million for the same period last year. There were no exceptions of material significance in the second quarter of fiscal 2011 or 2010.

Net earnings for the second quarter of fiscal 2011 were $4.9 million (earnings per share of $0.38) compared with $5.0 million (earnings per share of $0.37) in the same period of fiscal 2010.

Comprehensive income 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 entirely of unrealized gains and losses on translation of financial statements of related entities with foreign functional currency to U.S. dollar reporting currency. Comprehensive income in the second quarter of fiscal 2011 of $5.0 million was comprised of net income of $4.9 million, as reported above, plus unrealized gains of $0.2 million on the translation to U.S. currency of financial statements of Canadian entities.

Consolidated Six Months Results

For the six months ended December 31, 2010, revenue of $286.9 million was $1.2 million higher than the same period in the previous year. Higher average unit selling prices due to increased raw material costs more than offset a 5.2% decline in volumes. Softer demand for feed products, particularly in complete feeds, is reflective of the decline in the size of cattle and swine herds and poultry flocks.

Consolidated gross profit for the first half of fiscal 2011 was $41.0 million, unchanged from the prior year. Stronger volumes, mainly in the second quarter, enabled RNS to offset the effect of higher raw material costs and record a $0.7 million increase in gross profit in the second half. RFO's gross profits were unchanged in the second half as lower volumes were offset by improved unit margins over last year while overall production expenses remained flat. RFI's gross profits were lower by $0.7 million in the second half due to reduced margins relative to last year when RFI benefited from more favourable purchasing positions.

Operating expenses of $30.6 million in the first half of fiscal 2011 were unchanged from the prior year. Starting last year, the Company has initiated several process improvement and waste reduction projects with the assistance of external consultants utilizing "lean manufacturing" concepts which are expected to help reduce operating costs and improve quality of products and services over the long term. Start-up costs for these initiatives offset other cost reductions made this year including reduced bad debts expense.

EBITA in the first six months of fiscal 2011 was $14.7 million compared to $14.6 million for the same period last year. EBITA is comprised of operating income before amortization and unusual items. There were no unusual items of material significance in the first six months of fiscal 2011.

Net earnings after taxes for the six months ended December 31, 2010 were $6.4 million (earnings per share of $0.50) compared with net earnings after taxes of $6.1 million (earnings per share of $0.45) in the same period last year.

The Company manages its exposure to changes in interest rates, ingredient prices, and foreign exchange rates through the use of financial and non-financial derivative instruments which are recorded at fair value in the consolidated balance sheet with changes in fair value recorded in earnings. In the first six months of fiscal 2011 the Company recorded gains of $1.0 million associated with market valuations of derivatives compared to gains of $0.1 million last year. In the case of derivative commodity instruments such as futures contracts associated with ingredients used in the production of animal feeds to fulfill contracted sales to customers at fixed price commitments, these gains will be offset by future commodity price losses.

Comprehensive income of $6.7 million in the six months year-to-date of fiscal 2011 was comprised of net income of $6.4 million, as reported above, plus unrealized gains of $0.3 million on the translation to U.S. currency of financial statements of Canadian entities.

Reconciliation of Non-GAAP Financial Measures

The Company reports its financial results according to Canadian GAAP. However, included in this management discussion and analysis are certain non-GAAP financial measures and ratios which the Company's management believes provide useful information in measuring the financial performance and financial condition of the Company. These measures and ratios do not have a standardized meaning prescribed by Canadian GAAP 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 Canadian GAAP. Operating income is defined as net earnings before finance costs, interest income and provision for income taxes. EBITA is defined as operating income before amortization and exceptions.

The following table is a reconciliation of EBITA to net earnings, the most closely comparable GAAP measure to EBITA:

EBITA Three months ended   Six months ended  
  December 31   December 31  
($ million) 2010   2009   2010   2009  
Net earnings $ 4.9   $ 5.0   $ 6.4   $ 6.1  
Provision for income taxes   2.9     3.0     3.9     4.0  
Interest income   (0.1 )   (0.1 )   (0.1 )   (0.2 )
Finance costs   0.1     0.2     0.2     0.3  
Operating income $ 7.8   $ 8.1   $ 10.4   $ 10.4  
Amortization of property, plant and equipment   2.0     2.0     3.9     3.9  
Other amortization   0.2     0.2     0.4     0.3  
EBITA $ 10.0   $ 10.2   $ 14.7   $ 14.6  

SEGMENT RESULTS

The following is a summary of operating income of Ridley's reporting segments. 

Operating Income (Loss) Three months ended   Six months ended  
  December 30   December 30  
($ million) 2010   2009   2010   2009  
Ridley Feed Operations (RFO) $ 3.2   $ 4.2   $ 4.1   $ 3.9  
Ridley Feed Ingredients (RFI)   0.9     0.9     1.7     2.4  
Ridley Nutrition Solutions (RNS)   4.5     3.7     6.3     5.6  
Corporate   (0.8 )   (0.7 )   (1.7 )   (1.5 )
Consolidated Operating Income $ 7.8   $ 8.1     10.4   $ 10.4  

Ridley Feed Operations (RFO)

The Ridley Feed Operations (RFO) segment is comprised of Feed-Rite and Hubbard Feeds which operate as traditional Canadian and U.S. feed businesses producing a broad range of complete feeds, supplements and premixes primarily for commercial livestock and poultry sectors. RFO's overall volume was lower by 5.8% in the second quarter of fiscal 2011 compared to last year. Reduced animal numbers and higher feed costs have reduced volumes in Canadian feed operations by 10.3% while volume in U.S. feed operations is lower by 3.5%. The downturn in volume was the result of reduced sales of low value-added complete feeds primarily in the swine sector. RFO gross profits of $13.5 million in the second quarter this year were 5.0% lower than the same period last year due to lower volumes that more than offset improved unit margins. Unit margins were higher over last year as a result of rising raw material prices and a continuing shift in the product mix to higher value added, lower inclusion products.

For the six months of fiscal 2011, RFO volumes were 7.4% lower than last year, reflecting reduced sales of complete feeds for swine in Canada and the U.S. and lower volume of bulk feed commodities. Gross profits of $24.1 million in the year to-date were unchanged from last year as the decline in complete feed tonnage was offset by increased volume of higher value-added supplements, particularly in the beef sector in the U.S. and the poultry sector in Canada. Operating expenses in the year to-date were 1.2% lower compared to last year as a result of cost reduction initiatives taken last year.

In the first quarter of fiscal 2011, production ceased at manufacturing facilities in Manitou and Arborg, Manitoba and customer volume from those plants was consolidated into larger facilities in Brandon and Winnipeg. Disposal of the facility at Arborg, Manitoba was completed in the second quarter of fiscal 2011.

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. RFI revenues of $32.9 million in the second quarter of fiscal 2011, including intersegment sales, increased by 10.5% from the same period last year, as a result of a change in product mix to higher cost products relative to last year.

The change in product mix helped to improve gross profits by 3.4% to $1.9 million in the second quarter this year.

For the year to-date, RFI revenues increased by 2.1% to $60.6 million as a result of a higher cost product mix relative to last year. Gross profits of $3.5 million for the six months of 2011 were 16.4% lower than last year mainly due to lower unit margins in the first quarter this year relative to last year. Unit margins last year benefited from favourable purchasing positions following a rise in raw material prices.

Ridley Nutrition Solutions (RNS)

Ridley Nutrition Solutions (RNS) includes Ridley's feed supplement block and equine nutrition businesses. RNS volume in the second quarter of fiscal 2011 was higher by 10.7% relative to last year as a result of an expansion of distribution channels that has helped reach new customers for block supplements. Economic conditions in the beef sector have also improved this year and colder weather in the second was favourable to cattle feed supplementation. RNS gross profits of $8.3 million in the second quarter this year were improved by 11.6% over last year on stronger volume that more than offset weaker unit margins following recently higher raw material costs. Unit margins were stronger last year partly on the basis of more favourable purchasing positions. For the six months of fiscal 2011, RNS volumes were 7.0% higher than last year while gross profits of $13.4 million were 5.4% ahead of last year due to higher volumes.

Capital Expenditures

Capital expenditures in the second quarter of fiscal 2011 were $1.8 million compared to $2.9 million in the same period a year ago. Capital expenditures in the first three months of fiscal 2011 were mainly on a variety of routine equipment and facility upgrades. Capital expenditures were higher for the six months last year as $2.2 million was invested in capacity expansions at facilities in Worthington, MN and Mendota, IL.

Liquidity/Capital Resources/Cash Flow

Ridley's working capital and debt to equity positions are summarized below:

Balances ($000) as of: December 31 2010   September 30 2010   June 30 2010   March 31 2010   December 31 2009  
Working capital (i) $ 40,907   $ 43,279   $ 39,334   $ 47,612   $ 47,816  
Net debt (ii)   1,814     9,747     6,719     11,842     11,429  
Equity   154,603     149,563     147,926     152,121     153,061  
Net debt to equity ratio   1.2 %   6.5 %   4.5 %   7.8 %   7.5 %
   
(i) Working capital is defined as current assets less current liabilities, excluding cash and short term deposits.
(ii) Net debt is defined as bank obligations and capital leases, less cash and short term deposits.

Working capital balances generally increase in the second quarter of each year in conjunction with higher seasonal sales volumes. While increased accounts receivable and accounts payable in the three months of the second quarter were offsetting, a $3.1 million increase in customer prepayments was the major factor in the $2.4 million reduction in working capital balances to $40.9 million as at December 31, 2010. Although raw material costs have trended higher this year, raw material inventories at December 31, 2010 were materially unchanged from the end of the previous quarter as a result of a focus on turnover rates and elimination of unnecessary stocks.

Cash generated in the second quarter was used to reduce Ridley's outstanding net debt from $9.7 million at the beginning of the period to $1.8 million as at December 31, 2010. Net debt as at December 31, 2010 was comprised of long term debt of $0.6 million and a $2.3 million balance in revolving credit, less $1.1 million of cash and short term deposits.

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:

Summary of Changes in Cash Available Three months ended   Six months ended  
  December 31   December 31  
($ million) 2010   2009   2010   2009  
Cash flow from operating activities $ 6.8   $ 7.4   $ 9.9   $ 9.8  
Net decrease (increase) in non-cash working capital balances   2.1     (0.2 )   0.5     (4.4 )
Decrease (increase) in loans receivable, net   (0.1 )   -     -     0.1  
Proceeds on disposal of property, plant and equipment   0.2     0.1     0.3     0.4  
Capital expenditures, excluding business acquisitions   (1.8 )   (2.9 )   (3.9 )   (5.4 )
Increase in cash available $ 7.3   $ 4.4   $ 6.7   $ 0.4  

For the second quarter of fiscal 2011, cash flows from operations net of capital expenditures were $7.3 million compared to $4.4 million in the same three-month period last year. An increase in customer prepayments and lower capital expenditures in the period were contributing factors in the $2.9 million increase in cash flows relative to the prior year.

Outstanding Share Data

Ridley's share capital consists of an unlimited number of common shares, with no par value. On December 13, 2010 the Company 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 share repurchase program permits the Company to purchase for cancellation up to 640,339 of its common shares over the twelve month period ending December 14, 2011. This normal course issuer bid follows a previous share repurchase program which terminated on December 14, 2010. Under the previous share repurchase program, the Company repurchased for cancellation 456,600 shares at an average price of C$8.33 per share, excluding commissions. As at December 31, 2010, the Company had made no share repurchases under the new normal course issuer bid. The number of shares outstanding as at December 31, 2010 and as at February 10, 2011 was 12,806,778.

Selected Quarterly Financial Information

(US $ millions except per share data) Fiscal First Second Third Fourth  
  Year Quarter Quarter Quarter Quarter  
Revenue 2011 127.6 159.3      
  2010 135.7 150.0 141.6 120.3  
  2009 169.3 163.6 140.7 129.8  
Net earnings (loss) (before exceptions (i) net of income taxes). 2011 1.5 4.9      
  2010 1.1 5.0 2.5 (1.5 )
  2009 2.7 3.0 3.5 (0.2 )
Net earnings (loss) 2011 1.5 4.9      
  2010 1.1 5.0 2.5 (3.9 )
  2009 2.9 0.7 3.5 (8.4 )
Net earnings (loss) per share (EPS) 2011 0.12 0.38      
  2010 0.08 0.37 0.19 (0.28 )
  2009 0.21 0.05 0.25 (0.60 )
(i) Exceptions include: asset impairment loss, restructuring charges, gain on sale of facilities, claim settlement and goodwill impairment.

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 increases demand for beef feed. Other product lines are only marginally affected by seasonal conditions. Commodity-based agricultural raw materials constitute a significant component of the Company's complete feed production. Fluctuating commodity prices can influence revenues and associated cost of sales as selling prices and product costs generally move in relation to changes in commodity prices.

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 Multilateral 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.

International Financial Reporting Standards

The Canadian Accounting Standards Board (AcSB) requires all public companies to adopt International Financial Reporting Standards (IFRS) for interim and annual financial statements for fiscal years beginning on or after January 1, 2011. The Company will report its financial results in accordance with IFRS for the year ended June 30, 2012 and its quarterly unaudited interim results starting with the quarter ending September 30, 2011. The Company will provide comparative data on an IFRS basis, including an opening balance sheet as at July 1, 2010.

The Company formally commenced its conversion plan in the first quarter of fiscal 2009 and has engaged the services of an external advisor with IFRS expertise to assist in the conversion. Regular reporting is provided to management and the Audit Committee of the Board of Directors. The conversion plan consists of three phases: assessment, analysis, and reporting & implementation. The assessment and analysis phases, including a third party diagnostic are complete. Initial work on reporting and implementation has started. The Company is currently working through the IFRS adjustments with its external auditors.

The Company has performed an evaluation of is financial information systems and the financial reporting impact of divergences identified to date and concluded that transition to IFRS will not require material modifications to information and reporting systems. The Company has concluded its internal controls over financial reporting, disclosure controls and procedures are appropriately designed and properly functioning for an IFRS reporting environment. The design includes new controls over the transition accounting.

Areas where the adoption of IFRS will have a significant impact are:

  • IAS 19 – Employee Benefits, require the past service cost element of defined benefit plans to be amortized on a straight-line basis over the average period until the benefits become vested. To the extent the benefits are already vested, the past service cost is recognized immediately in earnings. Under GAAP, past service costs are amortized on a straight-line basis over the expected average remaining service period of active employees covered by the plan. Additionally, IAS 19 provides the following accounting policy choices regarding recognizing actuarial gains and losses: a) corridor method which is similar to current GAAP, b) directly to income in the year incurred, c) directly in equity through comprehensive income. The International Accounting Standards Board has initiated a project to make fundamental improvements to the recognition, presentation and disclosure of defined benefit plans. An exposure draft was issued in April 2010, with the final standard expected to be issued in mid-2011. The exposure draft includes eliminating the use of the corridor method. The expected impact of adopting IAS 19 on the opening transition balance sheet is an increase in long-term liabilities of $11.4 million, a decrease in deferred income tax liability of $4.5 million and a net reduction in equity of $6.9 million. The Company has chosen to recognize actuarial gains and losses directly through equity as a component of other comprehensive income.
  • IAS 36 – Impairment of Assets, uses a one-step approach in determining impairment of long-lived and finite-lived intangible assets by comparing asset carrying values with the higher of fair value less costs to sell and value in use, which is based on discounted future cash flows. GAAP uses a two-step approach in determining impairment. First, a comparison is made of long-lived asset carrying values to undiscounted future cash flows to determine if impairment exists. If under this basis it is determined impairment exists, the impairment is calculated by comparing asset values to fair value in a similar manner as computed under IFRS. The use of discounted cash flows under IFRS in determining fair value less costs to sell compared to undiscounted cash flows in step one under GAAP results in the Company realizing an impairment of certain assets under IFRS. The expected impact of adopting IAS 36 on the opening transition balance sheet is a decrease in property, plant & equipment of $12.7 million, an increase in deferred tax benefits of $2.3 million, a decrease in deferred tax liabilities of $1.5 million and a net reduction to equity of $8.9 million.

The Company will elect to reclassify cumulative translation differences totalling $11.2 million as of January 1, 2010 from a separate component of equity to retained earnings. This has no impact on total equity.

The transition date to IFRS for the Company's majority shareholder is January 1, 2010. As a result, the Company has elected to measure its assets and liabilities at the carrying values that are included in its parent company's consolidated financial statements. This commentary is intended to highlight only those areas believed to be the most significant and is not intended to be a complete list of all expected changes. The International Accounting Standards Board continues to issue new accounting standards and, as a result, the final impact of IFRS can only be accurately measured once all the applicable IFRS at the conversion date are known. The analysis and policy decisions that have been made are based on the Company's expectations regarding accounting standards anticipated to be effective upon conversion to IFRS. Readers are cautioned that disclosed impacts of IFRS on financial reporting are preliminary and may be subject to change.

Future IFRS changes will include a new accounting standard for leases. The International Accounting Standards Board issued an exposure draft with an underlying concept to record operating leases in a similar manner as finance leases. The result is recording a leased asset, which is amortized, and an offsetting lease liability. An element of interest is recognized over the lease term, as the liability is initially established at a discounted present value. The effective date for this change is expected to be no earlier than January 1, 2013.

Forward-Looking Information

This report contains "forward-looking" information. The forward-looking information includes statements concerning 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 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

The economic drivers of Ridley's commercial feed business are strongly influenced by the dynamics of its customer base, the North American livestock and poultry production industry. Producers' prices this year continue to respond positively to lower animal numbers. Most livestock and poultry sectors in the U.S. and Canada are likely to operate profitably into 2011. However, feed input costs are trending higher and producers remain cautious of expansionary plans. In this environment, a continuing focus on higher value- added, lower inclusion products will be a key element of Ridley's competitive growth strategy. Maintaining a balanced presence amongst each of the sectors of livestock and poultry production will remain important for diversifying Ridley's earnings across multiple geographies and product categories.

Ridley Inc., headquartered in Mankato, Minnesota and Winnipeg, Manitoba, is one of North America's leading commercial animal nutrition companies. Ridley employs more than 900 people in the United States and Canada in the manufacture and distribution 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.

RIDLEY Inc.      
Consolidated Balance Sheets      
(Unaudited)      
(Expressed in thousands of U.S. dollars) December 31 June 30 December 31
  2010 2010 2009
ASSETS      
Current assets      
  Cash and short-term deposits 1,081 902 1,594
  Accounts receivable 35,785 28,074 36,026
  Inventories (Note 7) 47,956 47,731 50,708
  Income taxes recoverable - 864 58
  Prepaids and other current assets 1,900 925 2,105
  Current portion of loans receivable 978 797 1,069
  Future income tax asset 1,402 1,533 1,602
Total current assets 89,102 80,826 93,162
 
Non-current assets      
  Loans receivable 234 365 472
  Assets held-for-sale (Note 11) 645 786 598
  Property, plant and equipment 86,068 85,045 91,439
  Future income tax asset 5,865 5,542 4,256
  Other assets 3,261 3,470 3,980
  Other intangibles 7,781 8,166 4,642
  Goodwill 37,982 37,982 37,982
Total non-current assets 141,836 141,356 143,369
 
TOTAL ASSETS 230,938 222,182 236,531
 
LIABILITIES and SHAREHOLDERS' EQUITY      
Current liabilities      
  Outstanding cheques in excess of bank balances 1,806 3,250 3,920
  Short-term debt 2,327 2,259 1,871
  Accounts payable and accrued liabilities 38,741 34,189 34,451
  Advances from customers 3,890 838 3,366
  Income taxes payable 295 - 91
  Current portion of long-term debt 55 54 53
Total current liabilities 47,114 40,590 43,752
 
Long-term liabilities      
  Long-term debt 513 5,308 11,099
  Future income tax liability 24,920 24,610 24,672
  Other accrued liabilities 3,788 3,748 3,947
Total long-term liabilities 29,221 33,666 39,718
 
Total liabilities 76,335 74,256 83,470
 
Shareholders' equity      
Share capital (Note 9) 53,229 53,229 55,127
Retained earnings 90,678 84,321 86,706
Accumulated other comprehensive income (Note 8) 10,696 10,376 11,228
  101,374 94,697 97,934
Total shareholders' equity 154,603 147,926 153,061
 
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 230,938 222,182 236,531
                 
                 
RIDLEY Inc.                
Consolidated Statements of Earnings and Retained Earnings  
(Unaudited)                
(Expressed in thousands of U.S. dollars) Three Months Ended   Six Months Ended  
  December 31   December 31  
  2010   2009   2010   2009  
   
Revenue 159,288   149,969   286,862   285,676  
Cost of sales (Note 7) 135,558   126,453   245,910   244,736  
Gross profit 23,730   23,516   40,952   40,940  
   
Operating (income) expenses                
  Selling, general and administrative 13,590   13,095   26,023   25,806  
  Amortization of property, plant and equipment 1,982   1,971   3,884   3,937  
  Gain on sale of facility (Note 11) (56 ) -   (56 ) -  
  Research and development 226   228   331   498  
  Other amortization 193   166   386   335  
Net operating expenses 15,935   15,460   30,568   30,576  
   
Operating income 7,795   8,056   10,384   10,364  
   
Finance costs (110 ) (170 ) (245 ) (348 )
Interest income 58   87   122   166  
Earnings before income taxes 7,743   7,973   10,261   10,182  
   
Provision for income taxes (Note 10) 2,879   2,953   3,904   4,037  
Net earnings for the period 4,864   5,020   6,357   6,145  
   
Retained earnings, beginning of period 85,814   82,410   84,321   81,285  
Net earnings for the period 4,864   5,020   6,357   6,145  
Excess over stated value of shares purchased for cancellation (Note 9) -   (724 )     (724 )
Retained earnings, end of period 90,678   86,706   90,678   86,706  
   
Net earnings per share, basic and diluted 0.38   0.37   0.50   0.45  
           
           
Consolidated Statements of Comprehensive Income
(Unaudited)          
(Expressed in thousands of U.S. dollars) Three Months Ended   Six Months Ended
  December 31   December 31
  2010 2009   2010 2009
 
Net earnings for the period 4,864 5,020   6,357 6,145
Unrealized gains (losses) on translation of financial statements of related entities with foreign functional currency to U.S. dollar reporting currency (Note 8) 176 (525 ) 320 815
Other comprehensive income (loss) for the period 176 (525 ) 320 815
Comprehensive income for the period 5,040 4,495   6,677 6,960
                 
                 
RIDLEY Inc.                
Consolidated Statements of Cash Flows  
(Unaudited)                
(Expressed in thousands of U.S. dollars) Three Months Ended   Six Months Ended  
  December 31   December 31  
  2010   2009   2010   2009  
   
Cash flow from operating activities                
  Net earnings for the period 4,864   5,020   6,357   6,145  
  Add (deduct) items not affecting cash:                
  Amortization of property, plant and equipment 1,982   1,971   3,884   3,937  
  Future income taxes 490   414   487   (214 )
  Foreign exchange gain on intercompany debt (828 ) (302 ) (1,386 ) (587 )
  Loss on sale of property, plant and equipment (27 ) 75   (56 ) 114  
  Gain on sale of facility (Note 11) 37   -   37   -  
  Other amortization 193   166   386   335  
  Other items not affecting cash 105   46   158   94  
  6,816   7,390   9,867   9,824  
   
Net change in non-cash working capital balances related to operations:                
  Accounts receivable (1,552 ) (329 ) (7,028 ) (4,160 )
  Inventories (58 ) (1,911 ) 303   (1,677 )
  Prepaids and other current assets 761   187   (953 ) (1,343 )
  Accounts payable and accrued liabilities (774 ) (726 ) 3,997   (774 )
  Advances from customers 3,429   2,336   3,041   1,626  
  Income taxes payable and recoverable 304   287   1,160   1,883  
Net cash from operating activities 8,926   7,234   10,387   5,379  
   
Cash flow from investing activities                
  Proceeds on disposal of facilities, property, plant and equipment 260   102   314   368  
  Purchase of property, plant and equipment (1,814 ) (2,895 ) (3,913 ) (5,062 )
  Purchase of intangibles -   (36 ) -   (386 )
  Decrease in loans receivable, net (107 ) 43   (48 ) 94  
Net cash utilized for investing activities (1,661 ) (2,786 ) (3,647 ) (4,986 )
   
Cash flow from financing activities                
  Repayment of short- and long-term debt (13,377 ) (4,770 ) (19,583 ) (6,493 )
  Proceeds from short- and long-term debt 5,339   1,852   14,548   7,782  
  Purchases of share capital for cancellation (Note 9) -   (3,745 ) -   (3,745 )
Net cash utilized for financing activities (8,038 ) (6,663 ) (5,035 ) (2,456 )
   
Effect of exchange rate changes on cash (50 ) (36 ) (82 ) (179 )
   
Increase (decrease) in cash and cash equivalents (823 ) (2,251 ) 1,623   (2,242 )
Cash and cash equivalents - beginning of period 98   (75 ) (2,348 ) (84 )
Cash and cash equivalents - end of period (725 ) (2,326 ) (725 ) (2,326 )
   
Cash and cash equivalents are comprised of:                
  Cash and short-term deposits 1,081   1,594   1,081   1,594  
  Outstanding cheques in excess of bank balances (1,806 ) (3,920 ) (1,806 ) (3,920 )
  (725 ) (2,326 ) (725 ) (2,326 )

Contact Information

  • RIDLEY Inc.
    Steve VanRoekel
    President and CEO
    (507) 388-9412
    or
    RIDLEY Inc.
    Gordon Hildebrand
    Chief Financial Officer
    (507) 388-9577
    www.ridleyinc.com