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In many cases, the end of the year gives you time to step back and take stock of the last 12 months. This is when many of us take a hard look at what worked and what did not, complete performance reviews, and formulate plans for the coming year. For me, it is all of those things plus a time when I u...
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Ridley Inc. Reports Financial Results for Fiscal 2013 Second Quarter

MANKATO, MINNESOTA -- (Marketwire) -- 02/05/13 -- Ridley Inc. (TSX:RCL) today reported its financial results for the three and six months ended December 31, 2012. All currency amounts are stated in U.S. dollars unless otherwise noted.

For the three months ended December 31, 2012, Ridley's earnings before interest, taxes, depreciation and amortization (EBITDA (i)) from continuing operations were $10.9 million compared to $7.9 million last year. Net income from continuing operations (net of income tax expense) for the period was $5.9 million (earnings per share of $0.46) compared to $3.8 million (earnings per share of $0.30) last year. Consolidated net income for the period (after income taxes) was $6.6 million ($0.51 per share) compared to $4.0 million ($0.31 per share) last year.

For the six months year-to-date, Ridley reported EBITDA from continuing operations of $20.9 million compared to $12.6 million for the same period last year. Net income from continuing operations (net of income tax expense) for the year-to-date was $11.2 million (earnings per share of $0.88) compared to $5.3 million (earnings per share of $0.42) last year. Consolidated net income for the year-to-date was $11.8 million ($0.92 per share) compared to $4.7 million ($0.37 per share) last year.

Ridley's revenues from continuing operations grew by 7.4% to $157.1 million in the second quarter this year, primarily a result of higher raw material prices relative to the same period last year and a continuing shift in product mix towards higher value added products. Overall tonnage volumes were lower by 1% from the same period last year as gains in feed supplements and blocks were offset by lower volumes of complete feeds. Sales volume in the second quarter continued to benefit from strong demand for feed supplements in the beef and dairy sectors resulting from drought in the United States. Gross profits from continuing operations increased by 17.4% in the second quarter to $21.4 million, partly from growth in volumes of higher value-added products and lower production costs, but mainly the result of increased average unit margins relative to last year when feed ingredient prices were declining.

U.S. Feed Operations (USFO) and Ridley Block Operations (RBO) produced strong results in the second quarter of fiscal 2013 on increased volumes of feed supplements and blocks in the beef cattle sector and improved unit margins from rising commodity prices and favorable product mix. USFO operating income increased by $1.7 million to $3.5 million in the quarter while RBO operating income increased by $1.4 million to $6.1 million. Ridley Feed Ingredients (RFI) reported improved gross profit in the second quarter as lower manufacturing overheads offset reduced volumes and the negative effect on unit margins of declining market prices for vitamins and other micro feed ingredients.

On November 28, 2012, Ridley acquired substantially all of the assets and assumed certain liabilities of Stockade Brands Inc. a privately held manufacturer of blocks, loose minerals and dried molasses products. The Stockade business will be integrated and reported within the RBO segment.

On November 30, 2012 Ridley and Masterfeeds Inc. completed the merger of their respective commercial livestock and poultry feed and nutrition businesses in Canada into a new limited partnership called Masterfeeds LP. The merger creates the second largest feed provider in Canada operating, among other things, 22 feed manufacturing plants and employing over 500 people in a business spanning Quebec, Ontario and the Prairie Provinces. Starting in the second quarter of fiscal 2013, Ridley's operations in Canada, previously reported as the Canadian Feed Operations (CFO) segment, are now reported as discontinued operations. Prior period results have been re-presented to reflect discontinued operations. Ridley owns a non-controlling interest in the limited partnership, Masterfeeds LP. Since start-up on December 1, 2012, Ridley's share of the earnings of Masterfeeds LP, reported in continuing operations as share of income of associate, was $0.2 million in the second quarter of fiscal 2013.

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management Discussion and Analysis dated as at February 4, 2013 and the accompanying interim consolidated financial statements for the three and six months ended December 31, 2012 have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") which incorporate International Financial Reporting Standards ("IFRS").

Second Quarter Results

The following summary data is presented to assist in understanding the fiscal 2013 second quarter results.


Summary of Results                     Three months ended  Six months ended 
                                              December 31       December 31 
($ million except for EPS)                  2012     2011     2012     2011 
----------------------------------------------------------------------------
Continuing Operations (i)                                                   
  Revenue                               $  157.1 $  146.3 $  300.1 $  273.2 
  Gross profit                              21.4     18.2     41.1     33.1 
  Operating income                           9.2      6.0     17.5      8.7 
  Net income from continuing operations      5.9      3.8     11.2      5.3 
  Earnings per share (EPS), from                                            
   continuing operations                $   0.46 $   0.30 $   0.88 $   0.42 
  EBITDA (ii)                               10.9      7.9     20.9     12.6 
----------------------------------------------------------------------------
Net income (loss) from discontinued                                         
 operations                             $    0.7 $    0.1 $    0.6 $   (0.7)
Net income for the period                    6.6      4.0     11.8      4.7 
Earnings per share (EPS), basic and                                         
 diluted                                $   0.51 $   0.31 $   0.92 $   0.37 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(i)  Continuing Operations excludes the results of the Company's feed       
     manufacturing operations in Canada previously reported as the Canadian 
     Feed Operations (CFO) segment and now comprising discontinued          
     operations.                                                            
                                                                            
(ii) 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 Second Quarter Results

Revenue from continuing operations was $157.1 million in the second quarter of fiscal 2013, an increase of $10.8 million over the same period last year. A comparison of revenue is not necessarily indicative of the strength of Ridley's business because revenue is influenced by fluctuating commodity prices. Raw material prices were generally higher this year than the same period last year, which had the effect of increasing average unit selling prices for the Company's feed products. Overall sales volume, as measured in tons of feed products sold, was lower by 1.0% in the second quarter reflecting mainly the shift in product mix from complete feeds to higher value-added products. Consequently, the 7.4% increase in sales revenues in the second quarter was largely the result of higher raw material prices relative to last year and continually improving product mix. Sales volume in the second quarter continued to benefit from higher demand for feed supplements in the beef and dairy sectors resulting from drought in the United States. Although the beef cattle population has declined for several years, tighter stocks have meant significantly improved cattle prices enabling cow/calf producers to operate profitably during the quarter.

Consolidated gross profit from continuing operations in the second quarter of fiscal 2013 was $21.4 million compared to $18.2 million in the same period last year. The increase of $3.2 million in gross profits in the second quarter is largely the result of the continuing shift in product mix to higher value-added products, particularly feed supplements and blocks, and an increase in average unit margins relative to last year when feed ingredient prices were declining. Direct production costs and manufacturing overheads, included in reported gross profits, were lower by 2.5% in the second quarter from last year.

Operating expenses, which include technical services, selling, administration expenses and research and development, were $12.2 million in the second quarter of fiscal 2013, unchanged from last year.

EBITDA is comprised of operating income of continuing operations before depreciation, amortization and exceptions. For the three months ended December 31, 2012 EBITDA was $10.9 million compared to $7.9 million for the same period last year. There were no material exceptions in the second quarter of this year or the prior year.

Net income from continuing operations, net of income tax expense, for the second quarter of fiscal 2013 was $5.9 million (earnings per share of $0.46) compared to $3.8 million (earnings per share of $0.30) in the same period of fiscal 2012.

Discontinued operations are comprised of the Company's feed manufacturing business in Canada, previously reported as the Canadian Feed Operations (CFO) segment, which was merged into a limited partnership with Masterfeeds Inc. in the second quarter this year. The Company owns a non-controlling interest in the limited partnership, Masterfeeds LP. Prior period results have been re-presented to reflect discontinued operations. Net income from discontinued operations was $0.7 million compared to $0.1 million last year. Since start-up on December 1, 2012, the Company's share of the earnings of Masterfeeds LP, reported as share of income of associate, was $0.2 million. Including income from discontinued operations and share of income of associate, the Company reported net income after taxes for the second quarter of $6.6 million (earnings per share of $0.51) compared to $4.0 million (earnings per share of $0.31) in the same period last year.

Consolidated Six Months Results

For the six months ended December 31, 2012, revenue of $300.1 million from continuing operations was $26.9 million higher than the same period last year. Higher feed ingredient prices account for the major part of the increase in revenues in the first half of fiscal 2013. An increase of 2.8% in sales volume, mainly in feed supplements and blocks, also contributed to the 9.9% increase in sales revenue in the year-to-date. Factors bearing on sales volume in the first half of fiscal 2013 included generally favorable economic conditions for livestock and poultry producers and increased demand for feed supplementation during the drought in the U.S.

Consolidated gross profit from continuing operations for the first half of fiscal 2013 was $41.1 million compared to $33.1 million in the year-to-date last year. Average unit margins increased this year from generally higher feed ingredient prices and the continuing shift in product mix to higher value-added products. Direct production costs and manufacturing overheads, included in reported gross profits, increased by 1.8% in the first half.

Operating expenses of continuing operations in the first half of fiscal 2013 were $23.6 million, a decrease of $0.9 million from last year. Other expense in the first half this year includes a reduction of $0.4 million in bad debts provisions. The loss on sale of facilities of $0.3 million in the first quarter of fiscal 2012 relates to the disposal of previously closed facility in Syracuse, Indiana.

EBITDA from continuing operations in the first six months of fiscal 2013 was $20.9 million compared to $12.6 million for the same period last year. EBITDA is comprised of operating income before amortization and exceptions. There were no material exceptions in the first half of the current year. Exceptions in the prior year were comprised of a $0.2 million loss net of income taxes on the sale of a redundant facility.

Net income from continuing operations, net of income tax expense for the six months ended December 31, 2012 were $11.2 million (earnings per share of $0.88) compared with net earnings after taxes of $5.3 million (earnings per share of $0.42) in the same period last year. Net income from discontinued operations was $0.6 million compared to a loss of $0.7 million last year. Including income from discontinued operations and share of income of associate, the Company reported net income after taxes for the second half of fiscal 2013 of $11.8 million (earnings per share of $0.92) compared to $4.7 million (earnings per share of $0.37) in the same period last year.

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 primarily 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 2013 was $8.4 million which was comprised of net income of $6.6 million, as reported above, less unrealized loss of $0.3 million on the translation of the financial statements of Canadian entities to U.S. currency, plus reclassification of $2.1 million of accumulated currency translation losses from equity to net income related to the transfer of Canadian assets to Masterfeeds LP in the second quarter this year.


----------------------------------------------------------------------------
----------------------------------------------------------------------------
EBITDA                               Three months ended    Six months ended 
                                            December 31         December 31 
($ million)                              2012      2011      2012      2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings                         $    5.9  $    3.8  $   11.2  $    5.3 
Provision for income taxes                3.5       2.2       6.4       3.2 
Share of income of associate             (0.2)        -      (0.2)        - 
Finance expense                           0.1       0.1       0.2       0.1 
Finance income                           (0.1)     (0.1)     (0.1)     (0.1)
----------------------------------------------------------------------------
Operating income                     $    9.2  $    6.0  $   17.5  $    8.7 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Amortization of property, plant and                                         
 equipment                                1.5       1.6       3.0       3.2 
Other amortization                        0.2       0.2       0.4       0.4 
Loss on sale of facilities                  -         -         -       0.3 
----------------------------------------------------------------------------
EBITDA                               $   10.9  $    7.9  $   20.9  $   12.6 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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 assets of its Canadian operations to Masterfeeds LP. The following is a summary of operating income (loss) of the reporting segments of the Company's continuing operations.


----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating Income (Loss)              Three months ended    Six months ended 
                                            December 31         December 31 
($ million)                              2012      2011      2012      2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
U.S. Feed Operations (USFO)          $    3.5  $    1.8  $    6.9  $    2.2 
Ridley Feed Ingredients (RFI)             0.4       0.3       1.1       0.9 
Ridley Block Operations (RBO)             6.1       4.7      10.8       7.0 
Corporate                                (0.8)     (0.7)     (1.4)     (1.5)
----------------------------------------------------------------------------
Consolidated operating income from                                          
 continuing operations               $    9.2  $    6.0  $   17.5  $    8.7 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

U.S. Feed Operations (USFO)

The U.S. Feed Operations (USFO) segment consists of twenty-one full-line production facilities operating in the United States producing and marketing products for the core animal nutrition market. USFO plants derive most of their business by manufacturing and marketing a broad range of complete feeds, supplements and premixes to meat, milk and egg producers, and owners of equine and companion animals located mostly in the Midwestern United States. Tonnage volume was lower by 2.0% in the second quarter of fiscal 2013 compared to last year. Lower volumes in the second quarter reflect the shift in product mix from complete feeds to higher value-added products. Feed supplements were in higher demand in the second quarter due to continuation of drought conditions in the United States. For the year-to-date, USFO volumes were higher by 2.8% over last year.

Gross profits in the second quarter this year were $11.1 million compared to $9.6 million in the same period last year. Average unit margins were higher this year over last year when unit margins were negatively affected by declining commodity prices. Gross profits for the six months year-to-date were higher by $4.0 million, also reflecting improvement in average unit margins over last year when commodity prices were declining. Operating expenses in the second quarter were lower by $0.2 million and were $0.7 million lower for the year-to-date on reduced administrative expenses. Operating income for the quarter was $3.5 million, an increase of $1.7 million from last year. For the year-to-date operating income was $6.9 million compared to $2.2 million for the same period last year.

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. Revenue in the second quarter of fiscal 2013, including intersegment sales, decreased by 7.5% from the same period last year as a result of declining prices and lower volumes from last year in feed-grade vitamins and amino acids, which comprise a significant part of RFI's manufactured and resale products.

Gross profit in the second quarter this year of $1.4 million was higher by $0.2 million or 14.3% over last year as lower manufacturing overheads offset reduced volumes and the negative effect on unit margins of declining market prices for feed ingredients. For similar reasons, gross profit for this year-to-date of $2.9 million was $0.1 million over last year. Operating expenses in the second quarter were almost even with the prior year but lower by $0.1 million for the year-to-date on reduced administrative expenses. Operating income for the quarter was $0.4 million, an increase of $0.2 million over last year. For the year-to-date, operating income was $1.1 million compared to $0.9 million last year.

Ridley Block Operations (RBO)

The Ridley Block Operations (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. Tonnage volume in the second quarter of fiscal 2013 was ahead of last year by 8.5% on higher demand for feed supplements due to continuation of drought in the United States. For the year-to-date, RBO volumes were 14.0% ahead of last year as a result of a favourable beef cattle economy and continued effects of drought.

Gross profits of $8.9 million in the second quarter this year were higher $1.5 million over last year as a result of increased volumes and higher average unit margins resulting from continuing improvements in product mix. For the six months year-to-date, gross profits were ahead of last year by $3.8 million on increased tonnage volumes and improved average unit margins. Operating expenses in the second quarter of fiscal 2013 increased by $0.1 million over last year but were unchanged for the six months year-to-date. Operating income increased over last year by $1.4 million in the second quarter and $3.8 million for the year-to-date in line with the increase in gross profits and good control of overhead expenses.

Liquidity/Capital Resources/Cash Flow

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


----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balances ($000)                                                             
 as of:           December 31 September 30   June 30  March 31  December 31 
                         2012         2012      2012      2012         2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Non-cash working                                                            
 capital (i)      $    32,723  $    46,336  $ 39,067  $ 46,556  $    45,595 
Net debt (cash                                                              
 surplus) (ii)          2,599       12,251     9,356    (8,453)      (2,624)
Equity                133,902      125,519   119,322   148,724      144,344 
Net debt-to-                                                                
 equity ratio             1.9%         9.8%      7.8%      n/a          n/a 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(i)  Non-cash working capital is defined as current assets less current     
     liabilities, excluding the following items: cash, short-term debt, and 
     the current portion of long-term debt.                                 
(ii) Net debt (cash surplus) is defined as bank obligations less cash and   
     short-term deposits. A cash surplus is defined as an excess of cash and
     short-term deposits over bank obligations.                             

Working capital balances decreased by $13.6 million in the three months between September 30, 2012 and December 31, 2012. The sale to Masterfeeds LP of the working capital of Canadian operations accounted for $10.9 million of the decrease in working capital in the second quarter of fiscal 2013. Additionally, working capital was reduced by $3.8 million from increased advances from U.S. customers who prepay their feed accounts for tax reasons.

Net debt of $2.6 million as at December 31, 2012 was comprised of total long term debt of $13.3 million less $10.7 million of cash and short term deposits. For the three months year-to-date the Company funded $3.6 million of capital expenditures and $5.7 million of business acquisitions from the cash generated from operating activities.

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           Three months ended    Six months ended 
 Available                                  December 31         December 31 
($ million)                              2012      2011      2012      2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flow from operating activities  $    5.4  $    6.1  $   12.7  $    9.0 
Net decrease (increase) in non-cash                                         
 working capital balances                 6.7       4.0      (0.5)     (1.4)
Increase in loans receivable, net        (0.1)     (0.1)     (0.4)     (0.6)
Proceeds on disposal of property,                                           
 plant and equipment                        -       0.1         -       0.5 
Capital expenditures, excluding                                             
 business acquisitions                   (3.6)     (1.9)     (6.6)     (4.0)
Business acquisitions                    (5.7)        -      (5.7)        - 
Distributions from associate              7.9         -       7.9         - 
Proceeds on transfer of Canadian                                            
 business unit                            2.1         -       2.1         - 
----------------------------------------------------------------------------
Increase in cash available           $   12.6  $    8.2  $    9.5  $    3.4 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

For the second quarter of fiscal 2013, cash flows from operations net of capital expenditures were $12.6 million compared to $8.2 million in the same three-month period last year. Cash flows from decreased working capital balances in continuing operations were $6.7 million in the second quarter of fiscal 2013 and mainly reflect the return to normal levels of accounts receivable and accounts payable. Business acquisitions of $5.7 million in the second quarter this year reflect the net purchase price for the assets of Stockade Brands Inc. Distributions from associate of $7.9 million were the return of cash from Masterfeeds LP following the transfer of working capital assets of Canadian operations to Masterfeeds LP. Proceeds of $2.1 million on the transfer of Canadian operations were the excess of working capital over start-up requirements set by the partners of Masterfeeds LP.

Capital Expenditures

Capital expenditures on property, plant and equipment, and intangible assets (software) in the second quarter of fiscal 2013 were $3.6 million compared to $1.9 million in the same period a year ago. Capital expenditures for the year-to-date were $6.6 million compared to $4.0 million last year. Major capital expenditures in the second quarter included $0.9 million for completion of facility renovations at Brandon, Manitoba.

Business Acquisitions

On November 28, 2012, the Company acquired substantially all of the assets and assumed certain liabilities of Stockade Brands Inc. (Stockade) for cash consideration of $5.7 million. Stockade manufactures blocks, loose minerals and dried molasses products for livestock from a single production facility in Pittsburg, Kansas. The business was integrated and reported within the RBO segment.

Investment in Masterfeeds LP

On November 30, 2012 the Company and Masterfeeds Inc. completed the merger of their respective livestock and poultry feed and nutrition businesses in Canada into a new limited partnership called Masterfeeds LP. The merger joins the Company's Feed-Rite brand with Masterfeeds to create the second largest feed provider in Canada operating, among other things, 22 feed manufacturing plants and employing over 500 people in a business spanning Quebec, Ontario and the Prairie Provinces. Masterfeeds Inc. and Ridley Inc. each contributed essentially all of their respective Canadian feed operating assets and liabilities in exchange for relative unit holdings in Masterfeeds LP. Ridley owns a non-controlling interest in Masterfeeds LP.

Starting in the second quarter of fiscal 2013, results of the Company's Canadian operations up to November 30, 2012 are reported as net income (loss) from discontinued operations. In the second quarter this year, net income of $0.7 million was reported in discontinued operations, which was comprised of an operating loss in Canadian operations of $2.1 million, offset by a net pre-tax gain of $3.7 million on the disposal of $21.6 million of Canadian assets at book value to Masterfeeds LP, less income tax expense of $1.0 million. Pre-tax earnings accruing from the Company's investment in Masterfeeds LP are reported as share of income of associate under the equity method of accounting, which in the second quarter of fiscal 2013 was $0.2 million. The Company's investment in Masterfeeds LP is reported as an investment in associate, which as at December 31, 2012 was $17.6 million, consisting of the initial investment of $25.4 million, less a cash distribution of $7.9 million received from the limited partnership, plus pre-tax share of income of associate in the second quarter of $0.2 million. As a limited partnership, Masterfeeds LP is not subject to income taxes; any taxable income is allocated between the respective partners.

The following chart describes the disposal to Masterfeeds LP on November 30, 2012 of the Company's Canadian business unit net assets, and related pre-tax gain.


($000)                                                                      
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Fair value of the Company's initial investment in associate                 
 (Masterfeeds LP)                                                  $ 25,405 
Net cash proceeds on disposal of Canadian business unit               2,076 
----------------------------------------------------------------------------
Fair value of consideration received                                 27,481 
Net assets of Canadian business unit disposed                        21,599 
----------------------------------------------------------------------------
Gain on disposal of Canadian business net assets                      5,882 
Recognized accumulated currency translation losses upon disposal            
 of Canadian business unit                                           (2,142)
----------------------------------------------------------------------------
Gain on disposal of Canadian business unit                         $  3,740 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Outstanding Share Data

Ridley's share capital consists of an unlimited number of common shares, with no par value. On December 13, 2012 Ridley 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 shares repurchase program permits the Company to purchase for cancellation up to 639,499 of its common shares over the twelve month period ending December 14, 2013. As at December 31, 2012 the Company had repurchased no shares under the current normal course issuer bid. The number of shares outstanding as at December 31, 2012 and as at February 4, 2013 was 12,789,978.

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 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.

Selected Quarterly Financial Information


----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                     Fiscal   First  Second   Third  Fourth 
(US$ millions except per share data)   Year Quarter Quarter Quarter Quarter 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue (i)                            2013   143.1   157.1                 
                                       2012   127.0   146.3   136.5   118.3 
                                       2011   102.2   130.2   123.9   114.5 
----------------------------------------------------------------------------
Net income (loss) before                                                    
 discontinued operations and                                                
 exceptions (ii) net of income taxes   2013     5.3     5.9                 
                                       2012     1.7     3.8     5.0     0.4 
                                       2011     1.5     4.4     3.5    (0.4)
----------------------------------------------------------------------------
Net income (loss) per share (EPS)                                           
 before discontinued operations and                                         
 exceptions (ii) net of income taxes   2013    0.42    0.46                 
                                       2012    0.13    0.30    0.39    0.03 
                                       2011    0.11    0.34    0.27   (0.03)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss)                      2013     5.3     6.6                 
                                       2012     0.7     4.0     4.0     0.3 
                                       2011     1.6     4.9     3.4    (0.4)
----------------------------------------------------------------------------
Net income (loss) per share (EPS)      2013    0.41    0.51                 
                                       2012    0.06    0.31    0.30    0.03 
                                       2011    0.13    0.38    0.27   (0.04)
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(i)  Revenue in the current and prior quarters has been restated to exclude 
     discontinued operations.                                               
(ii) Exceptions include asset impairment loss, restructuring charges, and   
     loss on sale of facilities.                                            

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 National 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.

Forward-Looking Information

This report contains "forward-looking" information. The forward-looking information includes statements concerning the proposed transaction described herein, 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 risk that the proposed transaction described herein will not be completed, 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

Since 2008, high feed ingredient prices have limited herd and flock expansion. The potential for continuing volatility in feed ingredient prices will remain one of the more significant drivers for Ridley's results. Ridley's business will be sensitive to any changes in the economic environment for producers and herd or flock populations. Ridley's growing lifestyle markets and higher-value added products tend to be more stable in market demand. In the face of these external uncertainties, the Company continues to improve its cost competitiveness through a number of initiatives to improve operating efficiencies including additional manufacturing automation, using lean manufacturing techniques and better utilization of information technology.

Ridley Inc., headquartered in Mankato, Minnesota, is one of North America's leading commercial animal nutrition companies. Ridley employs more than 700 people in the manufacture, sales and marketing 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.

CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of U.S. dollars) (unaudited)


                                      December 31      June 30  December 31 
                                Note         2012         2012         2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
ASSETS                                                                      
Current assets                                                              
  Cash                                     10,674        1,676        4,137 
  Accounts receivable                      31,027       32,971       37,170 
  Inventories                      6       42,803       47,783       51,490 
  Income taxes recoverable                      -            -          253 
  Prepaids and other current                                                
   assets                                   1,637        1,124        1,955 
  Current portion of loans                                                  
   receivable                               1,182          852        1,462 
----------------------------------------------------------------------------
Total current assets                       87,323       84,406       96,467 
Non-current assets                                                          
  Loans receivable                            369          307          388 
  Assets-held-for-sale             8          330          330            - 
  Property, plant and                                                       
   equipment                               64,097       69,623       72,597 
  Deferred income tax asset                 7,837        8,489        8,589 
  Investment in associate         11       17,612            -            - 
  Intangible assets                         8,953        7,392        7,669 
  Goodwill                         9       38,928       37,982       37,982 
----------------------------------------------------------------------------
Total non-current assets                  138,126      124,123      127,225 
----------------------------------------------------------------------------
TOTAL ASSETS                              225,449      208,529      223,692 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
LIABILITIES and SHAREHOLDERS'                                               
 EQUITY                                                                     
Current liabilities                                                         
  Outstanding cheques in                                                    
   excess of bank balances                  1,491        4,217          167 
  Short-term debt                               -            -        1,000 
  Accounts payable and                                                      
   accrued liabilities                     35,560       37,052       40,687 
  Advances from customers                   4,288          943        5,881 
  Income taxes payable                      2,587        1,451            - 
  Current portion of long-                                                  
   term debt                                   61           59           58 
----------------------------------------------------------------------------
Total current liabilities                  43,987       43,722       47,793 
Non-current liabilities                                                     
  Long-term debt                           13,212       10,973          455 
  Deferred income tax                                                       
   liability                               16,838       16,768       19,780 
  Other accrued liabilities                   413          492          510 
  Post-employment benefit                                                   
   obligations                             17,097       17,252       10,810 
----------------------------------------------------------------------------
Total non-current liabilities              47,560       45,485       31,555 
----------------------------------------------------------------------------
Total liabilities                          91,547       89,207       79,348 
----------------------------------------------------------------------------
                                                                            
Shareholders' equity                                                        
Share capital                     13       53,159       53,159       53,159 
                                                                            
Retained earnings                          80,793       68,982       93,584 
Accumulated other                                                           
 comprehensive income (loss)                  (50)      (2,819)      (2,399)
----------------------------------------------------------------------------
                                           80,743       66,163       91,185 
----------------------------------------------------------------------------
Total shareholders' equity                133,902      119,322      144,344 
----------------------------------------------------------------------------
TOTAL LIABILITIES and                                                       
 SHAREHOLDERS' EQUITY                     225,449      208,529      223,692 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Refer to accompanying notes to the interim consolidated financial statements.

Approved by the Board of Directors


(signed) B. P. Martin, Director          (signed) W. Harden, Director       

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

(Expressed in thousands of U.S. dollars) (unaudited)


                                     Three Months Ended    Six Months Ended 
                                            December 31         December 31 
                                    ----------------------------------------
                                Note     2012      2011      2012      2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue                               157,065   146,258   300,126   273,212 
Cost of sales                      6  135,668   128,027   259,054   240,098 
----------------------------------------------------------------------------
Gross profit                           21,397    18,231    41,072    33,114 
----------------------------------------------------------------------------
                                                                            
Operating (income) expenses                                                 
Technical services, selling                                                 
 and administrative                    12,213    12,082    23,736    23,838 
Other expense (income)                   (123)      (57)     (438)       26 
Loss on sale of facilities         8        -         -         -       282 
Research and development                  114       169       270       315 
----------------------------------------------------------------------------
Net operating expenses                 12,204    12,194    23,568    24,461 
----------------------------------------------------------------------------
                                                                            
Operating income                        9,193     6,037    17,504     8,653 
                                                                            
Share of income of associate      11      181         -       181         - 
Finance expense                           (85)      (47)     (175)     (140)
Finance income                             39        30        77        73 
----------------------------------------------------------------------------
Income before income taxes              9,328     6,020    17,587     8,586 
                                                                            
Income tax expense                12    3,455     2,208     6,395     3,239 
----------------------------------------------------------------------------
Net income from continuing                                                  
 operations                             5,873     3,812    11,192     5,347 
                                                                            
Net income (loss) from                                                      
 discontinued operations          10      681       138       619      (675)
                                                                            
Net income for the period               6,554     3,950    11,811     4,672 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Retained earnings, beginning                                                
 of period                             74,239    89,634    68,982    88,912 
Net income for the period               6,554     3,950    11,811     4,672 
----------------------------------------------------------------------------
Retained earnings, end of                                                   
 period                                80,793    93,584    80,793    93,584 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net income per share from                                                   
 continuing operations, basic                                               
 and diluted                             0.46      0.30      0.88      0.42 
                                                                            
Net income (loss) per share                                                 
 from discontinued operations,                                              
 basic and diluted                       0.05      0.01      0.04     (0.05)
                                                                            
Net income per share, basic                                                 
 and diluted                             0.51      0.31      0.92      0.37 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Refer to accompanying notes to the interim consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Expressed in thousands of U.S. dollars) (unaudited)


                                       Three Months Ended  Six Months Ended 
                                              December 31       December 31 
                                      --------------------------------------
                                           2012      2011     2012     2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income for the period                 6,554     3,950   11,811    4,672 
                                                                            
Unrealized gain (loss) on translation                                       
 of financial statements of related                                         
 entities with foreign functional                                           
 currency to U.S. dollar reporting                                          
 currency                                  (313)      528      627   (1,344)
Reclassification to net income of                                           
 accumulated currency translation                                           
 losses upon disposal of Canadian                                           
 business unit (Note 10)                  2,142         -    2,142        - 
----------------------------------------------------------------------------
Other comprehensive income (loss) for                                       
 the period                               1,829       528    2,769   (1,344)
                                                                            
Comprehensive income (loss) for the                                         
 period                                   8,383     4,478   14,580    3,328 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of U.S. dollars) (unaudited)


                                                       Accumulated          
                                                             other          
                                     Share  Retained comprehensive    Total 
                             Note  capital  earnings          loss   Equity 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at June 30, 2011            53,159    88,912        (1,055) 141,016 
----------------------------------------------------------------------------
                                                                            
Change in currency                                                          
 translation                             -         -        (1,344)  (1,344)
                                                                            
Net income for the period                -     4,672             -    4,672 
----------------------------------------------------------------------------
                                                                            
Balance at December 31,                                                     
 2011                          13   53,159    93,584        (2,399) 144,344 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
                                                       Accumulated          
                                                             other          
                                     Share  Retained comprehensive    Total 
                             Note  capital  earnings          loss   Equity 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at June 30, 2012            53,159    68,982        (2,819) 119,322 
----------------------------------------------------------------------------
                                                                            
Change in currency                                                          
 translation                             -         -         2,769    2,769 
                                                                            
Net income for the period                -    11,811             -   11,811 
----------------------------------------------------------------------------
                                                                            
Balance at December 31,                                                     
 2012                          13   53,159    80,793           (50) 133,902 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Accumulated other comprehensive loss is comprised entirely of the unrealized loss on translation of financial statements of related entities with foreign functional currency to U.S. dollar reporting currency.

Refer to accompanying notes to the interim consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of U.S. dollars) (unaudited)


                                     Three Months Ended    Six Months Ended 
                                            December 31         December 31 
                                    ----------------------------------------
                               Notes     2012      2011      2012      2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flow from operating                                                    
 activities                                                                 
Net income for the period               6,554     3,950    11,811     4,672 
Add (deduct) items not                                                      
 affecting cash:                                                            
  Depreciation of property,                                                 
   plant and equipment                  1,650     1,840     3,351     3,659 
  Deferred income taxes                   812       111       932      (130)
  Share of (income) of                                                      
   associate                      11     (181)        -      (181)        - 
  (Gain) loss on sale of                                                    
   property, plant and                                                      
  Equipment                                72       (16)      190        15 
  Loss on sale of facilities       8        -         -         -       314 
  (Gain) on disposal of                                                     
   Canadian business unit         10   (3,740)        -    (3,740)        - 
  Other amortization                      195       193       390       386 
  Other items not affecting                                                 
   cash                                     4        10       (73)       42 
----------------------------------------------------------------------------
                                        5,366     6,088    12,680     8,958 
Net change in non-cash                                                      
 working capital balances                                                   
  Accounts receivable                   8,330    (1,487)   (8,904)   (3,513)
  Inventories                              85      (795)   (3,008)   (4,349)
  Prepaids and other current                                                
   assets                                 638       165      (679)     (925)
  Accounts payable and                                                      
   accrued liabilities                 (8,009)       90     7,567       819 
  Advances from customers               3,888     5,765     3,427     5,228 
  Income taxes payable and                                                  
   recoverable                          1,718       289     1,135     1,301 
----------------------------------------------------------------------------
                                        6,650     4,027      (462)   (1,439)
----------------------------------------------------------------------------
Net cash from (for) operating                                               
 activities                            12,016    10,115    12,218     7,519 
----------------------------------------------------------------------------
Cash flow from investing                                                    
 activities                                                                 
  Proceeds on disposal of                                                   
   property, plant and                                                      
   equipment and facilities                 1        90         9       478 
  Proceeds on disposal of                                                   
   Canadian business unit         10    2,076         -     2,076         - 
  Purchase of property, plant                                               
   and equipment                       (3,540)   (1,845)   (6,465)   (3,923)
  Purchase of intangible                                                    
   assets                                 (32)      (90)     (129)      (90)
  Decrease (increase) in                                                    
   loans receivable, net                 (106)      (74)     (406)     (593)
  Business acquisitions            9   (5,732)        -    (5,732)        - 
  Distributions from                                                        
   associate                      11    7,944         -     7,944         - 
----------------------------------------------------------------------------
Net cash utilized from (for)                                                
 investing activities                     611    (1,919)   (2,703)   (4,128)
Cash flow from financing                                                    
 activities                                                                 
  Repayment of short- and                                                   
   long-term debt                      (6,675)   (2,277)   (8,624)   (7,261)
  Proceeds from short- and                                                  
   long-term debt                       6,030     1,014    10,859     7,307 
----------------------------------------------------------------------------
Net cash utilized from (for)                                                
 financing activities                    (645)   (1,263)    2,235        46 
Effect of exchange rate                                                     
 changes on cash                            -        (4)      (26)       65 
(Decrease) increase in cash                                                 
 and cash equivalents                  11,982     6,929    11,724     3,502 
Cash and cash equivalents -                                                 
 beginning of period                   (2,799)   (2,959)   (2,541)      468 
----------------------------------------------------------------------------
Cash and cash equivalents -                                                 
 end of period                          9,183     3,970     9,183     3,970 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Cash and cash equivalents are                                               
 comprised of:                                                              
  Cash                                 10,674     4,137    10,674     4,137 
  Outstanding cheques in                                                    
   excess of bank balances             (1,491)     (167)   (1,491)     (167)
----------------------------------------------------------------------------
                                        9,183     3,970     9,183     3,970 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Refer to accompanying notes to the interim consolidated financial statements.

Contacts:
RIDLEY Inc.
Steve VanRoekel
President and CEO
(507) 388-9400

RIDLEY Inc.
Gordon Hildebrand
Chief Financial Officer
(507) 388-9577
www.ridleyinc.com

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