MRR

The following discussion and analysis should be read in conjunction with the FY 2013 fourth 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, May 2, 2013 /CNW Telbec/ -

Consolidated Income And Comprehensive Income and Equity

Revenues for the year (last year) were $58,953,000 ($59,456,000) decreasing by $503,000 (-0.8%). As shown in the segmented information, sales and income from operating activities amounted to $58,588,000 ($59,262,000) being 99.4% (99.7%) of total revenues. Income from corporate totaled $365,000 ($194,000). Unrealized losses in fair market value of the portfolio amounted to $153,000 compared to $21,000 last year. Operating Revenues decreased by $674,000 (-1.1%) compared to last year. Revenue from Corporate increased by $171,000; for details refer to Portfolio Income Summary under Corporate.

Costs and expenses for the year (last year) were $57,981,000 ($58,754,000), a decrease of $773,000 (-1.3%). Costs related to operating activities, before exchange and interest, decreased by $707,000 (-1.2%). Expenses related to corporate increased by $26,000.

Operating results are discussed later on in this report.

The impact of the fluctuating Canadian dollar resulted in a total currency exchange loss of $30,000 compared to $185,000 last year, all included under cost of sales. As disclosed in the Notes, the net exposures were as follows: at February 28, 2013, US ($312,000) and at February 29, 2012, US$2,565,000.

Interest expensed on bank indebtedness amounted to $79,000 for the year compared to interest expensed on bank indebtedness and reducing term loan of $159,000 last year for a decrease of $80,000. Interest related to the long-term debt was $23,000 last year.

Profit before income taxes for the year (last year) was $972,000 ($702,000), an increase of $270,000. Profit from operating activities for the year (last year) was $824,000 ($700,000), an increase of $124,000. Profit from corporate for the year (last year) was $148,000 ($2,000), an increase of $146,000.

Income taxes for the year (last year) were $172,000 ($82,000). Details of the income tax components are presented in the Notes to the financial statements.

Profit for the year (last year) was $800,000 ($620,000) or $0.32 ($0.24) per share.

Dividends paid during the year amounted to $2,028,000. This represents a special dividend of $0.80 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.

Revenues for this quarter (last year) were $14,671,000 ($16,014,000), a decrease of $1,343,000 (-8.4%). Revenue from operating activities amounted to $14,424,000 ($15,801,000) being 98.3% (98.7%) of total revenues. Income from corporate totaled $247,000 ($213,000). Operating revenues for this quarter decreased by $1,377,000 (-8.7%) compared to this quarter last year.  Revenue from Corporate increased by $34,000.

Costs and expenses for this quarter (last year) were $14,240,000 ($15,532,000), a decrease of $1,292,000 (-8.3%). Costs related to operating activities, before exchange and interest, decreased by $1,315,000 (-8.5%).

Interest expense for this quarter (last year) was $18,000 ($47,000) and was $16,000 in 2013Q3, $14,000 in 2013Q2 and $31,000 in 2013.Q1.

Profit before income taxes for this quarter (last year) was $431,000 ($482,000), a decrease of $51,000. Profit from operating activities was $246,000 ($281,000), a decrease of $35,000 and corporate was $185,000 ($201,000), a decrease of $16,000.

Income taxes for this quarter (last year) were $64,000 (-$28,000). The effective tax rates are presented in the Notes to the financial statements.

Profit for this quarter (last year) was $367,000 ($510,000) or $0.15 ($0.20) per share.

Consolidated Cash Flows, Liquidity and Financial Position

In investing activities, the Company added $2,102,000 of net property, plant and equipment compared to $2,150,000 last year.

Available credit facilities

The credit facility available and reported at last year-end remains substantially unchanged. The facility is comprised of a revolving line of credit for $7,000,000 CDN {or its US equivalent}. The Company may also take advantage of Bankers Acceptances. The financial covenants and arrangements relating to financing facility are detailed in the Notes to the audited consolidated financial statements. These covenants are being respected and have been met.

Trade receivables decreased by $1,447,000 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 $1,455,000 (-16.8%) and overall volumes of rice decreased by (-24.6%).

Marketable securities - see table of Investment Mix in discussion of results.

Property, plant and equipment increased by $610,000 comprised of additions of $2,102,000 and amortization of $1,492,000.

Bank indebtedness was $804,000 compared to $3,044,000 at last year-end.

Trade and other payables decreased by $834,000 mainly due to timing on rice purchases.

Deferred taxes, net liability, increased by $27,000.

Total equity decreased by $1,069,000 to $17,631,000 from $18,700,000 and represents $6.96 ($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

Cash Flows, Liquidity and Financial Position by operating segment

Food processing and selling
Trade receivables decreased by $704,000 compared to last fiscal year-end. Account balances are substantially current, there are no anticipated serious collection issues and any potential bad debts have been provided for in the accounts.

Inventories decreased by $1,455,000 (-16.8%) and overall volumes of rice decreased by (-24.6%).

Property, plant and equipment increased by $610,000 comprised of additions of $2,102,000 and amortization of $1,492,000.

Bank indebtedness was $1,086,000 compared to $3,224,000 at last year-end.

Trade and other payables decreased by $1,098,000 mainly due to timing on rice purchases.

Deferred taxes, net liability, increased by $19,000.

Ship agency services
Trade receivables decreased by $743,000 compared to last fiscal year-end. Account balances are substantially current, there are no anticipated serious collection issues and any potential bad debts have been provided for in the accounts.

Bank position was $3,672,000 compared to $3,384,000 at last year-end.

Trade and other payables increased by $258,000.

Corporate
Bank indebtedness was $3,390,000 compared to $3,203,000 at last year-end.

Portfolio was $3,288,000 compared to $4,988,000 at last year-end due to sales of securities to fund the $.80 /share special dividend paid at the end of the third quarter.

Deferred taxes, net liability, increased by $8,000.

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 28, 2013.  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. IFRS 10 provides a single model to be applied in the control analysis for all investees.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. IFRS 12 contains disclosure requirements for companies that have interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. 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 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 which are effective for annual periods beginning on or after July 1, 2012 and are to be applied retrospectively. 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 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. 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. Management is currently assessing the impact of this amended standard.

Discussion of Results:

In Food processing and selling, net sales decreased by $57,000 (-0.1%) to $53,663,000 for the year and decreased by $1,376,000 (-9.5%) for the quarter compared to last year while rice sales volumes decreased by 3.2% for the year and by 19.4% for the quarter compared to last year. The net sales decrease compared to last year is a result of decreased sales to industrial customers.  Costs and expenses decreased by $334,000 (-0.6%) to $53,299,000 for the year compared to last year.  Costs and expenses decreased by $1,331,000 (-9.3%) to $13,037,000 for the quarter compared to last year. Profit before income taxes for the year increased by $277,000 to $363,000 compared to last year and decreased by $46,000 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 retail market.

Higher pricing and better profitability for soybeans, wheat and corn during the last year prompted some American growers to increase the share of their land devoted to those crops. Early reports from USDA surveys predict a 3% drop in acreage in the 2013 plantings in the United States for long grain rice and for all rice types in total.

The world rice market experienced a price split during the last 18 months. The United States, South America and Thailand prices for long grain milled rice have typically been 30% to 40% higher than the market price in Vietnam, India and Pakistan.

The quality of rice harvested during the fall of 2010 was dismal, exhibiting low yields through North American rice mills including Dainty's mill in Windsor. Dainty was forced to import some foreign long grain rice to avoid shortages to our customers.  The quality of the American rice harvest during the fall of 2011 can be described as average. We are now consuming rice harvested during the fall of 2012. The long grain crop this year is again showing below average yields but not as severe as the 2010 crop.

Dainty has secured rice coverage going forward through the current crop year to protect against cost increases due to planted acreage reduction and the higher production costs in the American mills due to the lower milling yields experienced this crop year.

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 Ship agency services, revenue decreased by $617,000 (-11.1%) to $4,925,000 for the year and by $1,000 for the quarter compared to last year.

Profit before income taxes for the year decreased by $153,000 to $461,000 and increased by $11,000 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, portfolio income is summarized as follows:

During this year, global financial markets declined, the loss in Fair Market Value is $153,000 for the year compared to $21,000 last year. The portfolio remains conservatively invested and no significant policy changes are foreseen. Last year, revenues also included $58,000 representing the increase in cash surrender value of life insurance policies, net of premiums recorded in last quarter.

The change in mix is a result of liquidating part of the portfolio to fund the dividend declared and paid during the third quarter.

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 continue to impact margins. New flour accounts are partially offsetting the volume reductions incurred year to date.

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 continue to impact profitability.

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 will continue to negatively impact profit.

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) acceptance of new 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:

April 11th , 2013, the US Department of State issued a US Presidential permit as the final political step before property acquisition and construction can get underway for the Detroit River International Crossing.

Significant construction activities are expected to continue on the property sites adjacent to the Dainty Foods facility in Windsor, Ontario. Dainty Foods has completed infrastructure changes to the facility to protect our food products from the possibility of airborne contamination. These changes primarily include fine particle filtration units. The Canadian federal government reimbursed 1.6 million dollars of the 2.9 million dollar investment.

The company has initiated discussions with the Ontario Ministry of Transport to recover the balance of the capital costs, however the outcome of these discussions is uncertain at this time.

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.

For further information regarding financial risk management, please refer to the Notes to the interim financial statements.

On behalf of the Board

Dated at Montreal (Westmount), Quebec, May 2, 2013. 

SOURCE MRRM Inc.