The following discussion and analysis should be read in conjunction
with the FY 2013 second 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, Oct. 4, 2012 /CNW Telbec/ -
Consolidated Income And Comprehensive Income and Equity
Revenues for the period (last year) were $29,504,000 ($26,920,000)
increasing by $2,584,000 (9.6%). As shown in the segmented
information, sales and income from operating activities amounted to
$29,484,000 ($26,992,000) being 99.9% (100.3%) of total revenues.
Income from corporate totaled $20,000 (-$72,000). Unrealized losses
in fair market value of the portfolio amounted to $87,000 compared
to $181,000 last year. Operating Revenues increased by $2,492,000
(9.2%) compared to last year. Revenue from Corporate increased by
$92,000; for details refer to Portfolio Income Summary under
Corporate Investments. Costs and expenses for the period (last
year) were $29,064,000 ($27,270,000), an increase of $1,794,000
(6.6%). Costs related to operating activities, before exchange and
interest, increased by $1,835,000 (6.8%). Expenses related to
corporate decreased by $12,000. Operating results are discussed
later on in this report. The impact of the fluctuating Canadian
dollar resulted in a total currency exchange gain of $70,000
compared to $48,000 last year, all included under cost of sales. As
disclosed in the Notes, the net exposures were as follows: at
August 31, 2012, US$3,664,000; at August 31, 2011, US$791,000; 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 August 31, 2012, the Company had
foreign exchange contracts outstanding allowing the Company to buy
USD$4,000,000 at an average rate of 1.0225. The maturity dates of
these contracts range from September to December 2012. The Company
has recorded a current liability on the financial position
statement under the caption "derivative financial liabilities" in
the amount of $142,000. Interest expensed on bank indebtedness
amounted to $45,000 for the period compared to interest expensed on
bank indebtedness and reducing term loan of $83,000 last year for a
decrease of $38,000. Interest related to the long-term debt was
$17,000 last year. Profit (loss) before income taxes for the period
(last year) was $440,000 (-$350,000), an increase of $790,000.
Profit (loss) from operating activities for the period (last year)
was $532,000 (-$154,000), an increase of $686,000. Profit (loss)
from corporate for the period (last year) was -$92,000 (-$196,000),
an increase of $104,000. Income taxes for the period (last year)
were $93,000 (-$53,000). Details of the income tax components are
presented in the Notes to the financial statements. Profit (loss)
for the period (last year) was $347,000 (-$297,000) or $0.14
(-$0.12) 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| | | | | | | | | |Quarterly | | | | | | | | |
|Financial | | | | | | | | | |Results | | | | | | | | | |for the |
| | | | | | | | |eight most| | | | | | | | | |recent | Aug 31, |
May 31, | Feb 29, | Nov 30, | Aug 31, | May 31, | Feb 28, | Nov 30,
| |fiscal | 2012 | 2012 | 2012 | 2011 | 2011 | 2011 | 2011 | 2010 |
|quarters
|(2013.Q2)|(2013.Q1)|(2012.Q4)|(2012.Q3)|(2012.Q2)|(2012.Q1)|(2011.Q4)|(2011.Q3)|
|__________|_________|_________|_________|_________|_________|_________|_________|_________|
|(Expressed| | | | | | | | | |in | | | | | | | | | |thousands,| | |
| | | | | | |except for| | | | | | | | | |amounts | | | | | | | | |
|per share | | | | | | | | | |- | | | | | | | | | |unaudited)| $ |
$ | $ | $ | $ | $ | $ | $ |
|__________|_________|_________|_________|_________|_________|_________|_________|_________|
|Revenues | 14,801| 14,703| 16,014| 16,522| 12,572| 14,348| 15,864|
15,870|
|__________|_________|_________|_________|_________|_________|_________|_________|_________|
|Profit | 271| 76| 510| 407| -119| -178| 150| 900| |(loss) | | | |
| | | | |
|__________|_________|_________|_________|_________|_________|_________|_________|_________|
|Profit | 0.11| 0.03| 0.20| 0.16| -0.05| -0.07| 0.06| 0.35| |(loss)
per| | | | | | | | | |share | | | | | | | | |
|__________|_________|_________|_________|_________|_________|_________|_________|_________|
|Dividends | 0.00| 0.00| 0.00| 0.50| 0.00| 0.00| 0.15| 0.00| |per
share | | | | | | | | |
|__________|_________|_________|_________|_________|_________|_________|_________|_________|
Revenues for this quarter (last year) were $14,801,000
($12,572,000), an increase of $2,229,000 (17.7%). Revenue from
operating activities amounted to $14,694,000 ($12,745,000) being
99.3% (101.4%) of total revenues. Income from corporate totaled
$107,000 (-$173,000). Operating revenues for this quarter
increased by $1,949,000 (15.3%) compared to this quarter last
year. Revenue from Corporate increased by $280,000. Costs and
expenses for this quarter (last year) were $14,472,000
($12,704,000), an increase of $1,768,000 (13.9%). Costs related to
operating activities, before exchange and interest, increased by
$1,789,000 (14.2%). Included in the financial results for this
quarter (last year) are investment tax credits of $38,000
($144,000). Interest expense for this quarter (last year) was
$14,000 ($37,000) and was $31,000 in 2013.Q1. Profit (loss) before
income taxes for this quarter (last year) was $329,000 (-$132,000),
an increase of $461,000. Profit (loss) from operating activities
were $275,000 ($95,000), an increase of $180,000 and corporate were
$54,000 (-$227,000), an increase of $281,000. Income taxes for this
quarter (last year) were $58,000 (-$13,000). The effective tax
rates are presented in the Notes to the financial statements.
Profit (loss) for this quarter (last year) was $271,000 (-$119,000)
or $0.11 (-$0.05) per share. Consolidated Cash Flows, Liquidity and
Financial Position In investing activities, the Company added
$846,000 of net property, plant and equipment compared to
$1,255,000 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 $1,503,000 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
$1,842,000 (-21.2%) and overall volumes of rice decreased by
(-26.1%). Marketable securities - see table of Investment Mix in
discussion of results. Property, plant and equipment increased by
$108,000 comprised of additions of $846,000 and amortization of
$738,000. Cash and cash equivalents position was $487,000 compared
to bank indebtedness of $3,044,000 at last year-end. Trade and
other payables decreased by $6,000. Deferred taxes, net liability,
decreased by $40,000. Total equity increased by $413,000 to
$19,113,000 from $18,700,000 and represents $7.54 ($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 $2,898,000 (11.9%) to
$27,152,000 for the period and increased by $2,062,000
(18.2%) for the quarter compared to last year while rice
sales volumes increased by 8.9% for the period and by 11.5% for the
quarter 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 $2,112,000 (8.6%)
to $26,752,000 for the period compared to last year. Costs
and expenses increased by $1,910,000 (16.7%) to $13,333,000 for the
quarter compared to last year. Profit before income taxes for the
period increased by $786,000 to $400,000 compared to last year and
by $152,000 for the quarter 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. Rice prices in the United States have been
stable during the last several weeks due to weak export market
performance notwithstanding an overall reduction in planted acres
for the 2012-2013 crop year. According to early reports, the
2012 rice harvest is expected to result in average field yields
while milling yields are average to lower than average in some
areas. Generally, growers are not satisfied with current cash
market prices. More profitable corn, soybean and wheat crops may
lead growers to reduce rice acreage again next year. Dainty
will continue to watch the market carefully and make commitments to
rice at the appropriate times. Aggressive 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 $406,000 (-14.8%) to $2,332,000 for the period
and decreased by $113,000 for the quarter compared to last year.
Profit before income taxes for the period decreased by $100,000 to
$132,000 and increased by $28,000 compared to this quarter last
year. FY 2013 number of port calls were down compared to last
year. Industry volume on the west coast is stable.
Industry volume on the east coast is down approximately 15% versus
the same period last year due in part to weakness in the European
and Mediterranean economies. Canadian grain exports and oil
tanker imports have decreased. 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 period | For the quarter |
|_______________________________|__________________|__________________|
| | 2013| 2012| 2013| 2012|
|_______________________________|________|_________|________|_________|
|Dividend and interest income | $75,000| $78,000| $41,000| $35,000|
|_______________________________|________|_________|________|_________|
|Capital gains (losses) | $32,000| $31,000| $29,000| $49,000|
|_______________________________|________|_________|________|_________|
|Unrealized change in Fair Value|-$87,000|-$181,000|
$37,000|-$257,000|
|_______________________________|________|_________|________|_________|
|Totals: | $20,000| -$72,000|$107,000|-$173,000|
|_______________________________|________|_________|________|_________|
During this quarter, global financial markets slightly improved,
the loss in Fair Market Value is $87,000 for the period compared to
$181,000 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.
____________________________________________________________________
| | Aug 31, | May 31, | Feb 29, | Nov 30, | Aug 31, | |Investment
Mix | 2012 | 2012 | 2012 | 2011 | 2011 | |
|(2013.Q2)|(2013.Q1)|(2012.Q4)|(2012.Q3)|(2012.Q2)|
|__________________|_________|_________|_________|_________|_________|
|Cash & Equivalents| 2.2%| 0.6%| 0.9%| 0.9%| 4.7%|
|__________________|_________|_________|_________|_________|_________|
|Bonds | 25.1%| 25.5%| 25.3%| 24.0%| 24.6%|
|__________________|_________|_________|_________|_________|_________|
|Preferred Shares | 19.8%| 20.2%| 20.0%| 20.2%| 16.4%|
|__________________|_________|_________|_________|_________|_________|
|Canadian Equities | 33.6%| 34.4%| 35.4%| 38.9%| 38.7%|
|__________________|_________|_________|_________|_________|_________|
|U.S. & Foreign | 19.3%| 19.3%| 18.4%| 16.0%| 15.6%| |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 which decreased Dainty's ability
to offer successful bids for their business. We are actively
pursuing new flour accounts to replace the loss of volume. 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 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
property sites adjacent to the Dainty Foods facility soon. Dainty
Foods is completing 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. In
recognition of the existing long-term financial assets, the Board
of Directors has declared a special dividend of $0.80 per share
payable on November 30, 2012 to Common Shareholders of record on
November 9, 2012. On behalf of the Board (signed) (signed) Nikola
M. Reford Terry Henderson Chairman President & Chief Executive
Officer Dated at Montreal (Westmount), Quebec, October 4,
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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