The following discussion and analysis should be read in conjunction
with the FY 2013 first quarter statements filed with SEDAR.
Included in these documents may be forward-looking statements with
respect to the Company. These forward-looking statements by their
nature necessarily involve risks and uncertainties that could cause
actual results to differ materially from those contemplated by such
statements. The Company considers the assumptions on which these
forward-looking statements are based to be reasonable at the time
they were prepared but cautions the reader that these assumptions
regarding future events, many of which are beyond the control of
the Company, may ultimately prove to be incorrect. The unaudited
interim consolidated financial statements were prepared by the
Company in accordance with IFRS and have not been reviewed by the
Company's auditors. Certain comparative figures have been
reclassified to conform with the presentation adopted in the
financial statements. Additional documents and information are
available at the System for Electronic Document Analysis and
Retrieval (SEDAR) and can be accessed through the internet: For
MRRM's profile or for documents go to www.sedar.com Information is
also available on the Corporate website at www.MRRM.ca. MONTREAL,
June 20, 2012 /CNW Telbec/ - Consolidated Income And Comprehensive
Income and Equity Revenues for the period (last year) were
$14,703,000 ($14,348,000) increasing by $355,000 (2.5%). As shown
in the segmented information, sales and income from operating
activities amounted to $14,790,000 ($14,247,000) being 100.6%
(99.3%) of total revenues. Income from corporate totaled -$87,000
($101,000). Unrealized losses in fair market value of the portfolio
amounted to $124,000 (unrealized gains last year of $76,000).
Operating Revenues increased by $543,000 (3.8%) compared to last
year. Revenue from Corporate decreased by $188,000; for details
refer to Portfolio Income Summary under Corporate Investments.
Costs and expenses for the period (last year) were $14,592,000
($14,566,000), an increase of $26,000 (0.2%). Costs related to
operating activities, before exchange and interest, increased by
$45,000 (0.3%). Expenses related to corporate decreased by $10,000.
Operating results are discussed later on in this report. The impact
of the fluctuating Canadian dollar resulted in a total currency
exchange gain of $170,000 compared to $61,000 last year all
included under cost of sales. As disclosed in the Notes, the net
exposures were as follows: at May 31, 2012, US$1,515,000; at May
31, 2011, US$972,000; at February 29, 2012, US$2,565,000; at
February 28, 2011, US$4,487,000. The company uses foreign exchange
contracts to manage foreign exchange exposure. At May 31, 2012, the
Company had foreign exchange contracts outstanding allowing the
Company to buy USD$6,200,000 at an average rate of 1.0217. The
maturity dates of these contracts range from June to December 2012.
The Company has recorded a current and a short term asset on the
balance sheet under the caption "derivative financial assets" in
the amount of $84,000. Interest expensed on bank indebtedness
amounted to $31,000 for the period compared to interest expensed on
bank indebtedness and reducing term loan of $46,000 last year for a
decrease of $15,000. Interest related to the long-term debt was
$10,000 last year. Profit (loss) before income taxes for the period
(last year) was $111,000 (-$218,000), an increase of $329,000.
Profit (loss) from operating activities for the period (last year)
was $257,000 (-$249,000), an increase of $506,000. Profit (loss)
from corporate for the period (last year) was -$146,000 ($31,000),
a decrease of $177,000. Income taxes for the period (last year)
were $35,000 (-$40,000). Details of the income tax components are
presented in the Notes to the financial statements. Profit (loss)
for the period (last year) was $76,000 (-$178,000) or $0.03
(-$0.07) per share. The declaration and payment of dividends is at
the discretion of the Board of Directors. Summary of Quarterly
Results The following financial summary is derived from the
Company's financial statements for each of the eight most recently
completed fiscal quarters.
__________________________________________________________________________________________
|Summary of| May 31, | Feb 29, | Nov 30, | Aug 31, | May 31, | Feb
28, | Nov 30, | Aug 31, | |Quarterly | 2012 | 2012 | 2011 | 2011 |
2011 | 2011 | 2010 | 2010 | |Financial
|(2013.Q1)|(2012.Q4)|(2012.Q3)|(2012.Q2)|(2012.Q1)|(2011.Q4)|(2011.Q3)|(2011.Q2)|
|Results | | | | | | | | | |for the | | | | | | | | | |eight most|
| | | | | | | | |recent | | | | | | | | | |fiscal | | | | | | | | |
|quarters | | | | | | | | |
|__________|_________|_________|_________|_________|_________|_________|_________|_________|
|(Expressed| | | | | | | | | |in | | | | | | | | | |thousands,| | |
| | | | | | |except for| | | | | | | | | |amounts | | | | | | | | |
|per share | | | | | | | | | |- | | | | | | | | | |unaudited)| $ |
$ | $ | $ | $ | $ | $ | $ |
|__________|_________|_________|_________|_________|_________|_________|_________|_________|
|Revenues | 14,703| 16,014| 16,522| 12,572| 14,348| 15,864| 15,870|
16,471|
|__________|_________|_________|_________|_________|_________|_________|_________|_________|
|Profit | 76| 510| 407| -119| -178| 150| 900| 413| |(loss) | | | |
| | | | |
|__________|_________|_________|_________|_________|_________|_________|_________|_________|
|Profit | 0.03| 0.20| 0.16| -0.05| -0.07| 0.06| 0.35| 0.17| |(loss)
per| | | | | | | | | |share | | | | | | | | |
|__________|_________|_________|_________|_________|_________|_________|_________|_________|
|Dividends | 0.00| 0.00| 0.50| 0.00| 0.00| 0.15| 0.00| 0.00| |per
share | | | | | | | | |
|__________|_________|_________|_________|_________|_________|_________|_________|_________|
Consolidated Cash Flows, Liquidity and Financial Position In
investing activities, the Company added $200,000 of net property,
plant and equipment compared to $733,000 last year. Available
credit facilities The credit facilities available and reported at
last year-end remain substantially unchanged. The facilities are
comprised of a revolving line of credit for $7,000,000 CDN {or its
US equivalent} which bears interest at the Canadian prime rate for
Canadian loans and U.S. base rate for U.S. loans and, optionally,
the Company may take advantage of Bankers Acceptances. The
financial covenants and arrangements relating to financing
facilities are detailed in the Notes to the audited consolidated
financial statements. These covenants are being respected and have
been met. Trade receivables decreased by $1,630,000 compared to
last fiscal year-end. Account balances are substantially current,
there are no anticipated serious collection issues and any
potential write-offs have been provided for in the accounts.
Inventories decreased by $503,000 (5.8%) and overall volumes of
rice decreased by 11.4%. Marketable securities - see table of
Investment Mix in discussion of results. Property, plant and
equipment decreased by $168,000 comprised of additions of $200,000
and amortization of $368,000. Bank indebtedness was $1,427,000
compared to $3,044,000 at last year-end. Trade and other payables
decreased by $661,000 mainly due to timing on rice purchases.
Deferred taxes, net liability, increased by $23,000. Total equity
increased by $265,000 to $18,965,000 from $18,700,000 and
represents $7.48 ($7.38) per share. Capital stock remained
unchanged at $539,000 and represents 2,535,000 issued common
shares. The MRRM Inc. shares have a very limited distribution and
are infrequently traded on the TSX-Venture Exchange under the
symbol MRR. www.TSX-Venture Exchange Critical Accounting Policies:
The Company's critical accounting policies are those that it
believes are the most important in determining its financial
condition and results. A summary of the Company's significant
accounting policies, including the critical accounting policies, is
set out in the notes to the consolidated financial statements in
the annual report for the year ended February 29, 2012. An extract
of these policies is set out in the notes to the quarterly
consolidated financial statements. Future Accounting Changes: At
the date of authorization of the Company's financial statements,
certain new standards, amendments, and interpretations to existing
standards have been published but are not yet effective, and have
not been adopted early by the Company. Management anticipates that
all of the relevant pronouncements will be adopted in the Company's
accounting policy for the first period beginning after the
effective date of the pronouncement. Information on new standards,
amendments and interpretations that are expected to be relevant to
the Company's financial statements is provided below. Certain other
new standards and interpretations have been issued but are not
expected to have a material impact on the Company's financial
statements. IFRS 9 Financial Instruments The IASB aims to replace
IAS 39 Financial Instruments: Recognition and Measurement in its
entirety. The replacement standard (IFRS 9) is being issued in
phases. To date, the chapters dealing with recognition,
classification, measurement and de-recognition of financial assets
and liabilities have been issued. These chapters are effective for
annual periods beginning on or after January 1, 2015. Further
chapters dealing with impairment methodology and hedge accounting
are still being developed. Management has yet to assess the impact
that this amendment is likely to have on the consolidated financial
statements of the Company. However, they do not expect to implement
the amendments until all chapters of IFRS 9 have been published and
they comprehensively assess the impact of all changes. IFRS 10
Consolidated Financial Statements In May 2011, the IASB issued IFRS
10 Consolidated Financial Statements, which is effective for annual
periods beginning on or after January 1, 2013, with early adoption
permitted. IFRS 10 provides a single model to be applied in the
control analysis for all investees. The Company intends to adopt
IFRS 10 for the annual period beginning on March 1, 2013. The
extent of the impact of adoption of IFRS 10 is not expected to be
material. IFRS 12 Disclosure of Interests in Other Entities In May
2011, the IASB issued IFRS 12 Disclosure of Interest in Other
Entities, which is effective for annual periods beginning on or
after January 1, 2013, with early adoption permitted. IFRS 12
contains disclosure requirements for companies that have interests
in subsidiaries, joint arrangements, associates and unconsolidated
structured entities. The Company intends to adopt IFRS 12 for the
annual period beginning on March 1, 2013. The extent of the impact
of adoption of IFRS 12 is not expected to be material. IFRS 13 Fair
Value Measurement In May 2011, the IASB published IFRS 13 Fair
Value Measurement, which is effective prospectively for annual
periods beginning on or after January 1, 2013. IFRS 13 replaces the
fair value measurement guidance contained in individual IFRSs with
a single source of fair value measurement guidance. The standard
also establishes a framework for measuring fair value and sets out
disclosure requirements for fair value measurements. The Company
intends to adopt IFRS 13 prospectively for the annual period
beginning on March 1, 2013. The extent of the impact of adoption of
IFRS 13 is not expected to be material. IAS 1 Presentation of
Financial Statements In June 2011, the IASB published amendments to
IAS 1 Presentation of Financial Statements: Presentation of Items
of Other Comprehensive Income, which are effective for annual
periods beginning on or after July 1, 2012 and are to be applied
retrospectively. Early adoption is permitted. The amendments
require that a company present separately the items of Other
Comprehensive Income that may be reclassified to profit or loss in
the future from those that would never be reclassified to profit or
loss. The Company intends to adopt the amendments for the annual
period beginning on March 1, 2013. The extent of the impact of
adoption of the amendments is not expected to be material. IAS 19
Employee Benefits In June 2011, the IASB published an amended
version of IAS 19 Employee Benefits. Adoption of the amendment is
required for annual periods beginning on or after January 1, 2013,
with early adoption permitted. The amendment is generally applied
retrospectively with certain exceptions. The amendment will require
actuarial gains and losses to be recognized immediately in other
comprehensive income, past service costs to be fully recognized
immediately in profit or loss and the recognition of expected
return on plan assets in profit or loss to be calculated based on
the rate used to discount the defined benefit obligation. The
amendment also requires other additional disclosures. The Company
intends to adopt the amendment in its financial statements for the
annual period beginning on March 1, 2013. Management has yet to
assess the impact of this amended standard. Discussion of Results:
In Dainty Foods, net sales increased by $836,000 (6.5%) to
$13,728,000 for the period compared to last year while rice sales
volumes increased by 6.6% compared to last year. The net sales
increase compared to last year is a result of increased sales to
industrial customers. Costs and expenses increased by $202,000
(1.5%) to $13,419,000 for the period compared to last year. Profit
before income taxes for the period increased by $633,000 to
$309,000 compared to last year. The Company continues to pursue new
value-added retail products some of which will be outsourced. This
outsourcing will minimize capital investment while enhancing Dainty
Foods' offerings in the retail marketplace for both branded and
private label items. New selling relationships continue to be
developed and are intended to add strength to our retail sales
efforts. Dainty Foods International (DFI) continues to make inroads
into the US private label retail market. Acres planted in rice
dropped substantially in the United States in the 2011-2012 crop
year due to the prediction of a very large old crop carry over and
the expectation that corn and soybeans would command a higher price
to the grower than rice. However to date, the United States
suffered major reductions in world rice exports which resulted in a
softening of rice prices. Planted acres have again fallen during
the season in progress at this time. Prices have firmed and are on
a slow incline. Dainty will continue to watch the market carefully
and make commitments to rice at the appropriate times. Competitive
pricing by American rice mills and the weak US dollar have
negatively impacted margins for rice flour and bulk bagged food
service products. In Robert Reford, revenue decreased by $293,000
(-21.6%) to $1,062,000 for the period compared to last year. Profit
before income taxes for the period decreased by $128,000 to
-$52,000 compared to last year. FY 2013 port calls were off to a
slow start. Industry volume on the west coast is stable. Industry
volume on the east coast is down approximately 20% versus the same
period last year due in part to weakness in the European and
Mediterranean economies. Canadian grain exports have decreased and
are not expected to return to normal levels until the third
quarter. As of March 1st, 2012, substantially all of the assets of
MRRM (Canada) Inc. related to the ship agency's business were
transferred to Robert Reford Agency Inc., a corporation
incorporated under the Canada Business Corporations Act on February
25, 2011, the shares of which are wholly-owned by MRRM Inc.
Corporate Investments, portfolio income is summarized as follows:
__________________________________________________ | | For the
quarter | |_______________________________|__________________| | |
2013| 2012| |_______________________________|_________|________|
|Dividend and interest income | $34,000| $42,000|
|_______________________________|_________|________| |Capital gains
(losses) | $3,000|-$17,000|
|_______________________________|_________|________| |Unrealized
change in Fair Value|-$124,000| $76,000|
|_______________________________|_________|________| |Totals: |
-$87,000|$101,000|
|_______________________________|_________|________| During this
quarter, global financial markets declined, contributing to a loss
in Fair Market Value of $124,000 for the period compared to a gain
of $76,000 last year. The portfolio remains conservatively invested
and no significant policy changes are foreseen. The Corporate
Investments continue to be held with a long term view.
____________________________________________________________________
| Investment | May 31, | Feb 29, | Nov 30, | Aug 31, | May 31, | |
Mix | 2012 | 2012 | 2011 | 2011 | 2011 | |
|(2013.Q1)|(2012.Q4)|(2012.Q3)|(2012.Q2)|(2012.Q1)|
|__________________|_________|_________|_________|_________|_________|
|Cash & Equivalents| 0.6%| 0.9%| 0.9%| 4.7%| 2.6%|
|__________________|_________|_________|_________|_________|_________|
|Bonds | 25.5%| 25.3%| 24.0%| 24.6%| 24.5%|
|__________________|_________|_________|_________|_________|_________|
|Preferred Shares | 20.2%| 20.0%| 20.2%| 16.4%| 15.8%|
|__________________|_________|_________|_________|_________|_________|
|Canadian Equities | 34.4%| 35.4%| 38.9%| 38.7%| 40.9%|
|__________________|_________|_________|_________|_________|_________|
|U.S. & Foreign | 19.3%| 18.4%| 16.0%| 15.6%| 16.2%| |Equities
| | | | | |
|__________________|_________|_________|_________|_________|_________|
Certification The Company's management, under the direction and
supervision of the Chief Executive Officer and Chief Financial
Officer, continually evaluates the effectiveness of the Company's
disclosure controls and procedures and has concluded that such
disclosure controls and procedures are effective. The Company's
management is also responsible for establishing and maintaining
internal controls over financial reporting. These controls were
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes in accordance with IFRS. There have been no
changes in the Company's internal controls over financial reporting
during this quarter that have materially affected, or are
reasonably likely to materially affect, its internal control over
financial reporting. Outlook Dainty Foods expects to continue to
increase retail volumes of value-added products to existing and new
customers in Canada and the USA. Increased competitive pressure in
the flour segment will impact margins in the second half of the
year. Three major rice flour customers changed their business
structure over the last twelve months. Two of the three changed
their location of processing to plants located closer to the
American rice fields and two of the three changed the flour type to
that which can be considered commodity based which decreased
Dainty's ability to offer successful bids for their business. Loss
of rice flour volume as well as continued aggressive competitive
pricing of bagged rice for the food service market coupled with the
weak American dollar will impact profitability in the second half
of this fiscal year. In the Robert Reford business our joint
operating agreement with Norton Lilly and Montship continues to be
beneficial, however, the weakness in the European and Mediterranean
economies may negatively impact profit compared to last year. While
the Company is anticipating continued growth in food processing and
selling and maintaining a strong position within the ship agency
services business, growth will be impacted by several factors
including (i) the ability of the Company to secure rice at
competitive prices (ii) the rate of acceptance of new private label
products (iii) the ability within the marketplace to manage price
increases to cover increased costs (iv) the yield and quality of
rice supply and (v) general economic conditions. Risks and
Uncertainties Overview Management of risk includes properly
identifying, communicating and controlling the risks which may
cause a serious impact to the business. Management is confident
that the Company employs effective procedures to address all
material risks. Detroit River International Crossing Construction
Impact: June 15th , 2012, Prime Minister Stephen Harper and
Michigan Governor Rick Snyder jointly announced the approval to
proceed with the construction of the Detroit River International
Crossing between Windsor and Detroit. Significant construction
activities are expected to commence on the Transport Canada
property site adjacent to the Dainty Foods facility approximately
three months from now. Dainty Foods is proceeding with
infrastructure changes to the facility to protect our food products
from the possibility of airborne contamination. These changes
primarily include fine particle filtration units and enclosing dock
loading areas to protect our food products from the possibility of
airborne contamination. The capital cost of the protective measures
is approximately 3.2 million dollars and the ongoing costs of the
operation and maintenance of the new equipment are approximately
$350,000 per year. The company is continuing a negotiation process
with Transport Canada to recover the project costs but the outcome
of these negotiations is uncertain at this time. Capital costs will
be funded from the company's line of credit until a resolution with
Transport Canada is reached. The following items were discussed in
the MD&A in the last Annual Report and remain principally
unchanged. Please refer to these documents for this information.
Ability to Sustain Revenue Ability to Address Cost and Expense
Concerns Economic Conditions Environment For further information
regarding financial risk management, please refer to the Notes to
the interim financial statements. On behalf of the Board (Signed)
(Signed) Nikola M. Reford Terry Henderson Chairman President &
Chief Executive Officer Dated at Montreal (Westmount), Quebec, June
20, 2012. MRRM Inc. CONTACT: Lou Younan,
Vice-President Finance & CFO, MRRM Inc., (514)908-7777,Fax:
(514) 906-0220, mr@mrrm.ca
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