Ridley Posts Financial Results for Fiscal 2014 Third Quarter
Proquest LLC |
In a release on
For the three months ended
Ridley also reported that it has declared a special cash dividend on its common stock of CAD
Ridley's results in the third quarter of fiscal 2014 reflect increased tonnage volume, improved average unit margins from a favorably trending product mix and reduced overhead expenses on lower discretionary spending. Favourable weather conditions and good producer economics contributed to the 5.5 percent increase in tonnage volume in the third quarter despite lower volume in the beef sector relative to last year. Product mix trended towards higher value-added products, including feed supplement blocks, while unit margins benefited from more favorable raw material positions relative to last year. Despite higher manufacturing expenses relative to last year, Ridley generated a 5.6 percent increase in gross profits from continuing operations in the third quarter this year.
Operating income of continuing operations (before income taxes) increased by 21.7 percent in the third quarter of fiscal 2014 to
In the second quarter last year, Ridley merged its Canadian Feed Operations with
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis dated as at
THIRD QUARTER RESULTS
Exceptions - In the preceding summary data, net income was reported before exceptions. Those exceptions in the nine months ended
EBITDA - Operating income before depreciation, amortization and exceptions. EBITDA does not have a standardized meaning prescribed by GAAP and, therefore, is not readily comparable to similar measures presented by other companies. However, management believes that this measure provides investors with useful supplemental information.
Consolidated Third Quarter Results
Revenue from continuing operations was
Overall sales volume, as measured in tons of feed products sold, was 5.5 percent higher in the third quarter this year reflecting favourable market conditions, including extended winter conditions this quarter and good producer economics. While tonnage volumes were lower in the beef cattle sector from the easing of drought conditions that boosted demand for feed supplementation last year, volumes were higher in other animal species less affected by forage availability, including dairy cattle, swine, poultry and equine.
Consolidated gross profit from continuing operations in the third quarter of fiscal 2014 was
Operating expenses, which include technical services, selling, administration and research and development, in continuing operations were
EBITDA is comprised of operating income of continuing operations before depreciation, amortization and exceptions. For the three months ended
Net income from continuing operations, net of income tax expense, for the third quarter of fiscal 2014 was
Discontinued operations are comprised of the Company's feed manufacturing business in
The Company owns a non-controlling interest in the limited partnership,
Including income from discontinued operations, the Company reported net income after taxes for the three months ended
Consolidated Nine Months Results
For the nine months ended
Consolidated gross profit from continuing operations for the nine months ended
Operating expenses of continuing operations in the nine months ended
EBITDA from continuing operations in the first nine months of fiscal 2014 was
Net income from continuing operations for the nine months ended
The accompanying interim financial statements reflect the Company's adoption of IAS 19r "Employee Benefits" which significantly changed the recognition and measurement of defined benefit pension and post-retirement expense, and the disclosure of all employee benefits. Implementation of this standard in the Company's interim consolidated financial statements required restatement of the fiscal 2013 comparative numbers. In summary, the effects of IAS 19r on previously reported financial statements for the nine months ended
Ridley reports its financial results according to IFRS that have been incorporated into the Handbook of the
Comprehensive Income
Comprehensive income (loss) is the change in net assets that results from transactions, events and circumstances from sources other than investments by and/or distributions to shareholders. Other comprehensive income (OCI) is comprised of unrealized gains and losses on translation of financial statements of related entities with foreign functional currency to U.S. dollar reporting currency, the transition adjustment between retained earnings and accumulated other comprehensive income related to the adoption of IAS19r and the accumulated currency translation losses realized upon disposal of the Canadian business unit. Comprehensive income in the third quarter of fiscal 2014 was
SEGMENT RESULTS
In the second quarter of fiscal 2013, the Company modified its reporting segments to eliminate the Canadian Feed Operations (CFO) segment following the sale of substantially all of the net assets of its Canadian operations to
U.S. Feed Operations (USFO)
The USFO segment consists of twenty full-line production facilities, operating in
Tonnage volume increased by 2.0 percent in the third quarter of fiscal 2014 compared to last year. Beef feed volume last year reflected a significant increase in demand for feed supplements due to the severe drought throughout much of
Gross profits in the third quarter this year were
Operating expenses decreased by
Operating income for the third quarter of fiscal 2014 was
In the second quarter of fiscal 2014, the Company ceased feed manufacturing operations at its
Ridley Feed Ingredients (RFI)
The
Revenue in the third quarter of fiscal 2014, including intersegment sales, increased by
Gross profit of
Operating expenses in the third quarter were not materially changed from the prior year while expenses for the nine months year- to-date increased by
Operating income for the third quarter was
Ridley Block Operations (RBO)
The RBO segment manufactures a complete range of block supplements, including low moisture, pressed, compressed, composite and poured blocks, loose minerals and dried molasses from eight U.S. facilities.
RBO's tonnage volume in the third quarter of fiscal 2014 increased by 5.2 percent over last year, mainly from favourable market conditions, including extended winter conditions this quarter, and favourable producer economics. Year-to-date volumes were 1.8 percent lower than last year following a return to more normal conditions from the severe drought last year. Volume last year was positively influenced by drought conditions that increased demand for feed supplementation. With the easing of drought conditions this year, volumes returned to historically more normal levels, partly offset by the contribution to volume from the acquisition of Stockade Brands in
Gross profits of
Operating expenses in the third quarter of fiscal 2014 decreased by
Operating income increased over last year by
LIQUIDITY, CAPITAL RESOURCES, AND CASH FLOW
Net working capital is defined as current assets (excluding cash and the current portion of loans receivable) less current liabilities (excluding outstanding cheques in excess of bank balances, short-term debt, and the current portion of long-term debt).
Net debt (cash surplus) is defined as bank obligations and outstanding cheques in excess of bank balances less cash and short- term deposits.
Capitalization is debt plus equity.
Net working capital balances increased by
For the third quarter of fiscal 2014, cash available from operations net of capital expenditures and disposals (excluding business acquisitions) increased by
Subsequent to the end of the third quarter, the Company declared a special dividend of CAD
The Company's borrowing capacity under its loan agreement with
Capital Expenditures
Business acquisitions of
Investment in
On
Starting in the second quarter of fiscal 2013, results of the Company's Canadian operations through
On
Outstanding Share Data
The Company's share capital consists of an unlimited number of common shares, with no par value. On
SEASONALITY AND COMMODITY VARIABILITY
The Company experiences seasonal variations in revenue. Historically, revenue is strongest in the second and third fiscal quarters when colder weather from October to March typically increases demand for beef cattle feed. Other product lines are only marginally affected by seasonal conditions. Certain of the raw materials comprising the Company's products incorporate commodity- based products and the by-products of commodity processing. Fluctuating commodity prices may therefore influence revenues and associated cost of sales as the Company's selling prices are adjusted to reflect current raw materials markets.
Revenue in the current and prior quarters has been restated to exclude discontinued operations.
Exceptions include asset impairment loss, restructuring charges, and (gain) loss on sale of facilities.
Net income in fiscal 2013 and 2014 reflects the Company's adoption of IAS19r.
INTERNAL CONTROL OVER FINANCIAL REPORTING
The CEO and CFO have each signed form "52-109F2 - Certification of Interim Filings" and filed it with the appropriate securities regulators in
OUTLOOK
The major external drivers of Ridley's animal nutrition business are the prevailing economic conditions for producers of meat, milk and egg products, as well as market dynamics for feed ingredients purchased by producers or used as raw materials in the production of feed products, and weather related factors that affect the availability and quality of pastures and forages for livestock. In the long run, the commercial feed industry will be positively influenced by rising global demand for animal protein products, but will be challenged by the consolidation of livestock and poultry producers into larger and more integrated operations and, in
In response to this environment, Ridley has focused on developing its higher value-added product mix, including feed supplements, block products and premixes, and reaching new markets, including the growing lifestyle segments. Ridley continues to improve its cost competitiveness by managing overhead expenses and improving operating efficiencies through consolidation of excess capacity, production automation, adoption of lean manufacturing techniques, and better utilization of information technology.
Current economic conditions are generally favourable to most producers of meat, milk and egg products and have been a positive influence on Ridley's results this year. Feed ingredient costs, which comprise the majority of expense in livestock and poultry production, declined throughout the first half of the current fiscal year with a corresponding improvement in producers' financial condition. The contraction of herd populations during previous periods of high feed costs and drought now provide support to producer prices in most sectors of livestock and poultry production.
Ridley's financial results last year were significantly impacted by drought conditions that stimulated demand for feed supplementation in the beef sector. With the easing of drought conditions this year, market demand for Ridley's beef feed products has returned to a more normal level. However, demand in other animal production sectors, including dairy, poultry, swine and equine, has responded positively this year to good producer economics.
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