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Ridley Inc. (RCL)
Market: CDN Consolidated
$ 29.25
Dec 19, 2014, 1:00 PM EST
Change: 0.80 (2.81%)
Volume: 3,500
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MANKATO, MINNESOTA and WINNIPEG, MANITOBA--(Marketwire - Nov. 2, 2007) - Ridley Inc. (TSX:RCL) today reported its financial results for its fiscal 2008 first quarter ended September 30, 2007. All currency amounts are stated in U.S. dollars.

For the first three months of fiscal 2008, Ridley earned $2.6 million after income taxes or 19 cents per share compared to $1.8 million or 13 cents per share last year. Earnings before interest, taxes and amortization (EBITA(i)) for the first quarter of fiscal 2008 was $6.8 million compared to $5.6 million last year.

"We are pleased that Ridley has generated an earnings increase in the first quarter of fiscal 2008 compared to last year," announced Steve VanRoekel, President and CEO of Ridley Inc.

"Excluding a one-time gain of $0.8 million from the sale of redundant assets in our Canadian operations, our EBITA grew by 7.2%. Our U.S. feed operations and feed ingredients reporting segment each accomplished solid earnings as a result of strong sales growth and good cost controls. However, our Canadian feed operations remain challenged in the face of a difficult red meat farm economy on the Prairies," added VanRoekel.

"Our feed supplement block business posted marginally lower results this quarter compared to last year, reflecting a slower start to the feeding season this year. We are also coping this year with weather conditions in the southern U.S. states that have moderated demand for feed supplement blocks," commented VanRoekel.

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following Management Discussion and Analysis as of November 2, 2007 is based on the accompanying financial statements prepared using Canadian Generally Accepted Accounting Principles ("GAAP"). All amounts are in U.S. dollars unless otherwise stated.

Forward-Looking Information

This report contains "forward-looking" information. The forward-looking information includes statements concerning the Company'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 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 the Company'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 the Company's Annual Report. Unless otherwise required by applicable securities law, the Company disclaims any intention or obligation to publicly update or revise this information, whether as a result of new information, future events or otherwise. The Company cautions readers not to place undue reliance upon forward-looking statements.


First Quarter Results

The following summary data is presented to assist in understanding the
fiscal 2008 first quarter results:


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(Millions of U.S. dollars               3 Months Ended      3 Months Ended
 except for EPS)                     30 September 2007   30 September 2006
--------------------------------------------------------------------------
Revenue                                         $139.8              $124.4
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Net earnings                                       2.6                 1.8
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Diluted earnings per share (EPS)                  0.19                0.13
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EBITA(i)                                           6.8                 5.6
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(i)EBITA - Operating income before amortization. EBITA does not have a
   standardized meaning prescribed by Canadian 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 Financial Results

Revenue in the first quarter of fiscal 2008 increased by 12.4% to $139.8 million compared with $124.4 million in the prior year. Generally, a comparison of revenue on a dollar basis is not necessarily indicative of the strength of Ridley's business since fluctuating commodity prices may influence revenue. The revenue increase in the first quarter of 2008 is due mainly to higher commodity prices and the effect of currency exchange rates on Canadian revenues.

Overall tonnage sales volumes in the first quarter of the current year declined by 6.3% relative to last year. Feed demand was softer in both Canadian and U.S. feed operations in the first quarter while a general trend continued in the shift from lower-margin complete feed products to higher-margin premixes and supplements. Demand was also soft for feed supplement blocks in advance of the normally more active winter feeding season and as a result of unfavourable beef pasture conditions in the southern U.S. states.

Gross profit was $21.0 million in the first quarter of fiscal 2008 compared with $21.1 million in the same period last year. Strong revenue growth and good manufacturing expense controls in U.S. feed operations and the company's vitamin and trace mineral premix business offset lower gross profits in Canadian feed operations and block supplements.

Selling, general and administrative expenses of $14.8 million were lower in the first quarter of fiscal 2008 by $0.5 million compared to the prior year.

Operating income before interest and taxes in the first quarter was $4.8 million compared to $3.4 million last year. The $1.4 million increase in operating income reflects lower selling, general and administrative expenses and a one-time gain of $0.8 million on the sale of a premix facility and a fabrication/repair shop both located in Winnipeg, Manitoba.

First quarter income tax provisions were $1.7 million compared to $1.2 million in the previous year. Tax expense as a percentage of earnings in the first quarter was 39.2% compared to 39.8% in the prior year.

Net earnings for the fiscal 2008 first quarter were $2.6 million (diluted earnings per share of $0.19) compared with $1.8 million (diluted earnings per share of $0.13) in fiscal 2007. EBITA was $6.8 million in the first quarter of fiscal 2008 and $5.6 million for the same period in 2007.

As noted in its interim financials statements, the Company has adopted new guidelines of the Canadian Institute of Chartered Accounts (CICA) including the reporting of comprehensive income and its components. Comprehensive income is the change in the Company's net assets that result from transactions, events and circumstances from sources other than investments by and/or distributions to the Company's shareholders. The Company's comprehensive income in the first quarter of fiscal 2008 was $4.8 million comprised of $2.6 million in net earnings as reported above, and $2.2 million of unrealized gains on translation to U.S. currency of financial statements of related entities with foreign functional currency. Comprehensive income in the first quarter of the prior year was $1.8 million and was not materially affected by other comprehensive income. Other changes in accounting policies noted in the Company's interim financial statements had no material effect on its financial condition.

Segment Results

Starting in this interim report, the Company is reporting the results of its Ridley Feed Ingredients (RFI) business unit as a separate reporting segment. The prior year's segment results have been reclassified to conform to the current year reporting. RFI accounts for about 9% of Ridley's net revenues and about 10% of total assets. In prior financial reports, the results of RFI were included with the results of the Ridley Feeds Operations (RFO) reporting segment.

The Ridley Feed Operations (RFO) segment consists of full-line feed production facilities operating in the United States and Canada, producing and marketing products for the core animal nutrition market. RFO net revenues increased in the first quarter of fiscal 2008 over the prior year by 13.2% as a result of higher unit prices for manufactured feed products that followed from higher input costs of feed commodities. With about one-third of RFO revenues originating in Canada, RFO's reported net revenues were also higher due to the appreciation of the Canadian dollar against the U.S. dollar by approximately 6% between the first quarter of fiscal 2008 and 2007. Overall sales volumes of the RFO segment were lower by 6.1% in the first quarter of fiscal 2008 compared to last year.

Sales volumes of the U.S. operations of RFO were lower by 7.3% in the first quarter of fiscal 2008 as a result of lower seasonal volumes for young calves and declining swine feed sales. For the same period, RFO's sales revenues increased in the U.S. by 12.3% reflecting higher commodity prices and the continuing shift to higher-margin, lower-inclusion feed products such as premixes. Canadian feed sales volumes were lower by 3.7% in the first quarter as a result of competitive pressures, closure of a feed production plant in Alberta in January 2007 and reduction in the resale of low-margin feed ingredients. The strong Canadian dollar, lower producers' receipts and uncertainty over Canadian pork processing capacity continue to affect Canadian farm economics.

RFO reported lower gross profits by 3.9% in the first quarter of fiscal 2008 compared to the prior year. Continued growth in gross profit margins in the U.S. operations of RFO in the first quarter of fiscal 2008 were more than offset by a 28% decrease in the company's gross profits at its Canadian operations which experienced lower premix volumes resulting from sales force issues arising last year. For the first quarter of fiscal 2008, RFO reported operating income of $3.5 million, compared with $2.4 million in the same period of fiscal 2007. Most of this increase was accounted for by a one-time gain of $0.8 million resulting from the disposal of redundant assets including a fabrication shop and a premix facility in Canada whose production has been consolidated into an existing plant.

Ridley Nutrition Solutions (RNS) includes the feed supplement block operations and equine nutrition business. Sales volumes of RNS in the first quarter of fiscal 2008 (including inter-segment sales) were 7.1% lower than the first quarter of last year when the volume of feed supplement blocks manufactured by RNS reflected an early gain on the marketing season. In the current year, sales of feed supplement blocks, which are substantially dependent upon the beef cattle sector, were negatively impacted by continuing drought in the south-eastern region of the U.S. causing some liquidation of cattle herds in the region. At the same time, an abundance of grass following an unusually wet season in Texas has softened demand for supplemental feeding products in that key beef trade state. Gross profits in RNS decreased by 11.6% in the first quarter of 2008 due to reduced sales volumes and lower unit margins. The equine business unit within RNS reported moderately increased volume and gross profits.

The Ridley Feed Ingredients (RFI) segment consists of Ridley vitamin and trace mineral premixes, small packaged specialty products, medicated and non-medicated feed additives and micro feed ingredients produced and distributed through RFI's facility located in Illinois. RFI's net revenues in the first quarter of fiscal 2008 increased over the previous year by 18.9%, partly due to higher ingredient prices as well as increased volume of toll manufacturing for other ingredient suppliers. RFI generated a solid increase in gross profit on higher revenues over the same period last year reflecting an improved product-margin mix. Higher raw materials prices resulted in an increase in the value of RFI's inventories by $3.4 million from the first quarter of fiscal 2007 to the same period of the current year.

Corporate expenses were $1.2 million in the first quarter of fiscal 2008 compared to $1.6 million in the same period of fiscal 2007. Corporate expenses were higher in the prior year as a result of expenditures on potential expansion plans.


Liquidity/Capital Resources/Cash Flow

The Company's debt to equity position is summarized below:

                                    Sep 30-07     Jun 30-07   Sep 30-06
Balances as of:                         ($000)        ($000)      ($000)
------------------------------------------------------------------------

Debt(i)                                28,622        24,963      26,954
Equity                                150,673       145,863     137,981
Debt to equity                             19%           17%         20%

------------------------------------------------------------------------

(i)Debt is defined as bank obligations and capital leases.

In the three months ended September 30, 2007, total debt increased by $3.7 million to $28.6 million. The increase is due to higher levels of working capital reflecting higher commodity prices as well as a normal transition into a more active season. Working capital as at September 30, 2007 was $50.4 million, or $12.7 million higher than the same time last year.

In the first quarter of fiscal 2008, cash flow of $3.9 million from earnings and items not affecting cash was offset by $14.3 million of cash used to finance increased working capital requirements, resulting in the net use of $10.4 million in cash for operating activities. By comparison, for the same period in the prior year, cash flow from earnings was $4.0 million while $12.8 million was used to finance working capital needs, resulting in $8.8 million in net cash used for operating activities.

Excluding exchange rate effects, increased accounts receivable balances accounted for $6.6 million of the increased working capital while higher inventory levels accounted for $1.3 million. Lower accounts payable balances and reduced advances from customers increased working capital requirements by a further $6.6 million.

Capital Expenditures

Fiscal 2008 expenditures on capital assets were $2.6 million compared with $2.2 million a year ago. Year-to-date expenditures include $0.8 million for implementation of new management information systems. The balance of capital expenditures was made on a variety of smaller projects for the maintenance or replacement of production, packaging and storage equipment at various facilities.


Selected Quarterly Financial Information

The following is a summary of unaudited quarterly financial information
(in millions of U.S. dollars except per share information):

                                 Fiscal   First   Second    Third   Fourth
                                   Year Quarter  Quarter  Quarter  Quarter
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Revenue                            2008   139.8        -        -        -
                                   2007   124.4    144.0    136.9    126.3
                                   2006   120.5    138.3    131.1    115.7
Net earnings from continuing
 operations                        2008     2.6        -        -        -
(before asset impairment charges
 net of                            2007     1.8      4.3      3.0      1.2
 income tax)                       2006     2.5      4.8      3.9      2.1
Net earnings                       2008     2.6        -        -        -
                                   2007     1.8      2.8      3.1      1.3
                                   2006     2.5      4.8      3.9      2.1
Diluted EPS                        2008    0.19        -        -        -
                                   2007    0.13     0.20     0.22     0.10
                                   2006    0.18     0.34     0.29     0.15

Outstanding Share Data

The Company's share capital consists of an unlimited number of common shares, with no par value. The number of shares outstanding as at September 30, 2007 and as at November 2, 2007 was 13,859,300.

Business Acquisitions

There have been no business acquisitions for the year to date in fiscal 2008. Instalments related to an acquisition in fiscal 2006 were paid in the first quarter of fiscal 2008 and 2007.

Internal Control over Financial Reporting

The Chief Executive Officer and Chief Financial Officer have signed form 52-109F2 - Certification of Interim Filings and filed it with the appropriate securities regulators in Canada in compliance with Multilateral 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.

Litigation/Contingency

The actions by proposed representative plaintiffs continue against the Government of Canada and Ridley Inc. They seek to certify class actions in Alberta, Saskatchewan, Ontario and Quebec to include all Canadian cattle farmers who allegedly suffered damage as a result of international bans on trade in Canadian beef and cattle following the May 2003 diagnosis of Bovine Spongiform Encephalopathy (BSE) in a cow in Alberta. The Ontario action seeks a national class to include affected cattle farmers residing in the six remaining Canadian provinces.

The proposed representative plaintiffs seek general, special, aggravated and punitive damages on behalf of themselves and each of the proposed Canadian cattle farmer class members. Full particulars of the claims are yet to be provided.

In a decision released on June 15, 2007, the Superior Court of Quebec authorized the plaintiff to institute the action as a class action in Quebec. A notice to class members in Quebec was approved by the Court and published in September. A trial date in Quebec has yet to be scheduled. None of the remaining actions have been certified to proceed to trial as a class action in any other province. In Ontario, the Court of Appeal for Ontario dismissed each of the appeals by the parties against the decision to strike the claims in a decision released June 22, 2007. A hearing of the plaintiff's motion to certify the Ontario action as a class action has yet to be scheduled.

In September 2007, Ridley Inc. and the Government of Canada filed applications with the Supreme Court of Canada seeking leave to appeal from the decision of the Court of Appeal for Ontario denying the motions of Ridley and the Government of Canada to strike the claims of the Ontario plaintiff. The Court's decision on the leave applications is expected in calendar year 2008.

The actions in Saskatchewan and Alberta are in abeyance. There has been no decision made on the merits of the actions in any province. The lawsuits have been struck out or discontinued against Ridley Inc.'s majority shareholder, Ridley Corporation Limited, in all provinces.

At this time, the Company cannot determine what impact, if any, these lawsuits may have on it, or its future earnings, and no accruals have been made in respect of the actions. The Company believes that there is little prospect of any of its insurers responding favourably, and it will continue to fund the cost of the lawsuits from operating cash flow.

Outlook

Economic conditions in most segments of our U.S. markets are generally favourable for our livestock producer customers. The U.S. dairy herd continues to expand along with milk production while a tight world dairy market and high feed costs are maintaining producer prices. Broiler producers are also enjoying good returns despite high feed costs. Live cattle prices are higher over last year and are expected by industry sources to remain at relatively high levels going into 2008 although feedlot operators are likely to struggle with lower margins. Hog prices are lower as a result of continued growth in pork production and will likely remain at these lower levels through 2008. Overall, these conditions should provide support for continuation of moderate growth in our U.S. RFO operations into the new year. Similarly, we expect the RFI feed ingredients segment to maintain consistent results in the next quarter. Forecasts of another mild winter in the U.S. southern states may impede growth in our RNS feed supplement blocks segment.

Our operations in Western Canada remain challenged by the relatively weaker red meat farm economy and the disruption caused by the loss of customers in a single business unit last year as previously reported. Canadian beef producers and hog producers are suffering poor returns from the combination of a weakened U.S. currency which reduces the value of Canadian exports and exceptionally high feed costs driven by the surge in demand for ethanol production. The Canadian swine herd is expected to contract in 2008 while growing numbers of hogs will be shipped to the U.S. Corn Belt for finish feeding and slaughter. Management is focused on improving cost structures in our Canadian operations while rebuilding customer volume.

Ridley Inc. (www.ridleyinc.com), headquartered in Mankato, Minnesota and Winnipeg, Manitoba, is one of North America's leading commercial animal nutrition companies. Ridley employs more than 1,000 people in the United States and Canada in the manufacture and distribution 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 our Annual Information Form (AIF), is available on SEDAR at www.sedar.com.


CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, expressed in U.S. dollars)

RIDLEY Inc.

Three months ended September 30, 2007 and 2006



RIDLEY Inc.
Consolidated Balance Sheets
(Unaudited, expressed in thousands of     September 30 June 30 September 30
 U.S. dollars)                                    2007    2007         2006
---------------------------------------------------------------------------
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ASSETS
Current assets
 Cash and short-term deposits                    1,757   2,315        1,051
 Accounts receivable                            38,263  30,733       32,075
 Inventories                                    52,831  50,702       41,957
 Income taxes recoverable                            -     402            -
 Prepaids and other current assets               2,888   1,452        2,853
 Current portion of loans receivable             2,138   1,755        2,835
 Future income tax benefit                         974   1,623        2,094
---------------------------------------------------------------------------
Total current assets                            98,851  88,982       82,865


Non-current assets
Loans receivable, less current portion           1,460   1,872        1,813
Property, plant and equipment                   93,565  93,113       96,081
Other assets                                     3,105   3,182        3,475
Other intangibles                                3,835   3,856        3,920
Goodwill                                        50,881  50,062       49,502
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Total non-current assets                       152,846 152,085      154,791

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TOTAL ASSETS                                   251,697 241,067      237,656
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LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
 Outstanding cheques in excess of bank
  balance                                        7,771     272        6,545
 Short-term debt                                 2,471   3,711        2,228
 Accounts payable and accrued liabilities       34,161  38,633       30,463
 Advances from customers                         1,393   3,116        4,790
 Income taxes payable                            2,610   1,329        1,039
 Current portion of long-term debt                  52      49           99
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Total current liabilities                       48,458  47,110       45,164


Long-term liabilities
Long-term debt, less current portion            26,099  21,203       24,627
Future income tax liability                     22,272  22,959       25,903
Other accrued liabilities                        4,195   3,932        3,981
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Total long-term liabilities                     52,566  48,094       54,511

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Total liabilities                              101,024  95,204       99,675

Shareholders' equity
Share capital                                   57,604  57,604       57,604

Retained earnings                               79,196  76,602       69,418
Accumulated other comprehensive income
 (note 4)                                       13,873  11,657       10,959
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                                                93,069  88,259       80,377
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Total shareholders' equity                     150,673 145,863      137,981

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TOTAL LIABILITIES & SHAREHOLDERS' EQUITY       251,697 241,067      237,656
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RIDLEY Inc.
Consolidated Statements of Earnings and Retained Earnings

(Unaudited, expressed in thousands of U.S. dollars)     Three Months Ended
                                                              September 30
                                                         2007         2006
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Revenue                                               139,810      124,436
Cost of sales                                         118,824      103,353
---------------------------------------------------------------------------
Gross profit                                           20,986       21,083
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Operating (income) expenses
 Selling, general and administrative                   14,756       15,270
 Amortization of property, plant and equipment          1,991        2,141
 Gain on sale of facilities (Note 8)                     (807)           -
 Research and development                                 190          180
 Other amortization                                        21           89
---------------------------------------------------------------------------
Net operating expenses                                 16,151       17,680
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Operating income                                        4,835        3,403

Finance costs                                            (708)        (563)
Interest income                                           140          150
--------------------------------------------------------------------------

Earnings before income taxes                            4,267        2,990

Provision for income taxes                              1,673        1,189
---------------------------------------------------------------------------

Net earnings                                            2,594        1,801
---------------------------------------------------------------------------
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Retained earnings, beginning of period                 76,602       67,617
Current year earnings                                   2,594        1,801
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Retained earnings, end of period                       79,196       69,418
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Net earnings per share
 - basic                                                 0.19         0.13
 - diluted                                               0.19         0.13



Consolidated Statements of Comprehensive Income
(Unaudited, expressed in thousands of U.S. dollars)     Three Months Ended
                                                              September 30
                                                         2007         2006
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Net earnings                                            2,594        1,801
Unrealized gains (losses) on translation of
 financial statements of related entities with
 foreign functional currency to U.S. dollar
 reporting currency                                     2,216          (16)
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Other comprehensive income/(loss)                       2,216          (16)

Comprehensive income                                    4,810        1,785
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RIDLEY Inc.
Consolidated Statements of Cash Flows                   Three Months Ended
(Unaudited, expressed in thousands of U.S. dollars)           September 30
                                                           2007       2006
---------------------------------------------------------------------------
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Cash flow from operating activities
 Net earnings for the period                              2,594      1,801
 Add (deduct) items not affecting cash:
 Amortization of property, plant and equipment            1,991      2,141
 Future income taxes                                        (31)      (179)
 (Gain) loss on sale of property, plant and equipment        (9)        60
 Gain on sale of facilities                                (807)         -
 Other amortization                                          21         89
 Other items not affecting cash                              91        117
---------------------------------------------------------------------------
                                                          3,850      4,029

Net change in non-cash working capital balances
 related to operations:
 Accounts receivable                                     (6,642)    (3,837)
 Inventories                                             (1,277)    (1,231)
 Prepaids and other current assets                       (1,370)    (1,679)
 Accounts payable and accrued liabilities                (4,847)    (5,509)
 Advances from customers                                 (1,723)    (1,854)
 Income taxes payable and recoverable                     1,594      1,276
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Net cash utilized for operating activities              (10,415)    (8,805)
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Cash flow from investing activities
 Proceeds on disposal of facilities, property, plant
  and equipment                                           2,686         39
 Purchase of property, plant and equipment and
  investments                                            (2,590)    (2,176)
 Decrease (increase) in loans receivable, net                73       (736)
 Business acquisitions                                     (138)      (138)
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Net cash from (utilized for) investing activities            31     (3,011)

Cash flow from financing activities
 Repayment of short- and long-term debt                  (7,159)    (3,854)
 Proceeds from short- and long-term debt                  9,606      7,529
 Payment of finance costs                                     -       (181)
 Issuance of share capital                                    -        169
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Net cash from financing activities                        2,447      3,663

Effect of exchange rate changes on cash                    (120)       (17)

Decrease in cash and cash equivalents                    (8,057)    (8,170)
Cash and cash equivalents - beginning of period           2,043      2,676
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Cash and cash equivalents - end of period                (6,014)    (5,494)
---------------------------------------------------------------------------
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Cash and Cash Equivalents
 Cash and short-term deposits                             1,757      1,051
 Outstanding cheques in excess of bank balance           (7,771)    (6,545)
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                                                         (6,014)    (5,494)
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RIDLEY Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007

(unaudited)

1. Significant accounting policies and basis of presentation

These interim unaudited consolidated financial statements are based on accounting principles and practices consistent with those used in preparation of the annual audited financial statements, with the exception of the changes in accounting policies as outlined in Note 2. These interim consolidated financial statements do not include all the disclosures normally included in the Company's annual consolidated financial statements. They should be read in conjunction with the Company's consolidated financial statements for the year ended June 30, 2007, as set out in the 2007 Annual Report. All amounts are in U.S. dollars unless otherwise stated.

2. Changes in accounting policies

The Company has adopted the following Canadian Institute of Chartered Accountants (CICA) guidelines effective for the commencement of its 2008 fiscal year:

CICA 3855 Financial instruments - recognition and measurement

This pronouncement establishes standards for recognizing and measuring financial assets and liabilities and non-financial derivatives. It requires that: a) all financial assets and liabilities be measured initially at fair value, b) all financial assets be subsequently measured at either amortized cost or fair value depending on the type of instrument and any optional designations by the Company, c) all financial liabilities be subsequently measured at amortized cost or at fair value if they are classified as held for trading purposes, and d) all derivative financial instruments are measured at fair value, even when they are part of a hedging relationship. All changes in fair value are recorded in earnings unless cash flow hedge accounting is used in which case changes in fair value are recorded in other comprehensive income.

The Company has selected July 1, 2002 as its transition date to apply fair value accounting for all embedded derivatives. An embedded derivative is a component of a financial instrument or another contract of which the characteristics are similar to a derivative. The Company has determined that all of its embedded derivatives are exempt from fair value accounting.

CICA 3861 Financial instruments - disclosure and presentation

This pronouncement replaces handbook section 3860. It establishes standards for presentation of financial instruments and non-financial derivatives and identifies the information that should be disclosed.

CICA 1530 Comprehensive income

This pronouncement establishes reporting and disclosure of comprehensive income and its components. Comprehensive income is the change in a Company's net assets that result from transactions, events, and circumstances from sources other than investments by and/or distributions to the Company's shareholders. It includes items that would not normally be included in net earnings, such as: a) changes in the cumulative currency translation adjustments account relating to self-sustaining foreign operations, b) unrealized gains or losses on available-for-sale investments, and c) gains or losses on the effective portion of derivatives designated as cash flow hedges.

CICA 3251 Equity

This pronouncement replaces handbook section 3250 - Surplus with handbook section 3251 - Equity. It requires consistency of disclosure and presentation of equity components with the new requirements of section 1530 - Comprehensive Income.

CICA 3865 Hedges

This pronouncement establishes when and how hedge accounting may be applied. The standard replaces and expands upon Accounting Guideline 13 - Hedging Relationships, and requires hedges be designated as either fair value hedges, cash flow hedges or hedges of a net investment in a self-sustaining foreign operation. For a fair value hedge, the gain or loss on the hedging item is recognized in earnings in the period of change together with the offsetting change attributable to the hedged risk. For a cash flow hedge, as well as a hedge of a net investment in a self-sustaining foreign operation, the effective portion of the gain or loss on the hedging item is initially reported in other comprehensive income and subsequently recognized in earnings when the hedged item affects earnings.

As a result of the adoption of these standards, these additional items are now reported in the consolidated financial statements: a) comprehensive income and its components and b) accumulated comprehensive income and its components (Note 4). The comparative interim consolidated financial statements have not been restated, except for the retroactive restatement of the cumulative foreign currency translation adjustment account. All other sections have been applied prospectively in accordance with the transitional provisions.

The following table presents the carrying amount and the fair value of the Company's financial instruments. Amortized cost is calculated using the effective interest rate method. Fair value is based on quoted market prices when available. However, when financial instruments lack an available trading market, fair value is determined using management's estimates and is calculated using market factors for instruments with similar characteristics and risk profiles. These amounts represent point-in-time estimates and may not reflect fair value in the future. These calculations are subjective in nature, involve uncertainties and are a matter of significant judgement.


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                               Assets (Liabilities)   Assets (Liabilities)
                    Carried at Cost/Amortized Cost  Carried at Fair Value

As of September               Carrying        Fair
 30, 2007                        Value       Value         Carrying value
--------------------------------------------------------------------------

Cash and short-term deposits     1,757       1,757                      -
Accounts receivable             38,263      38,263                      -
Loans receivable                 3,598       3,598                      -
Financial derivative
 instruments                         -           -                    253
Outstanding cheques in
 excess of bank balance         (7,771)     (7,771)                     -
Accounts payable and
 accrued liabilities           (34,161)    (34,161)                     -
Advances from customers         (1,393)     (1,393)                     -
Short-term and
 Long-term debt                (28,622)    (28,622)                     -
Other accrued liabilities         (379)       (379)                     -


In the first quarter of fiscal 2008, the Company recorded a credit of $87,000 to cost of goods sold and a charge of $37,000 to finance costs associated with market valuations of derivatives.

Risk management

The Company manages risk and risk exposures through a combination of insurance, derivative financial instruments, a system of internal and disclosure controls and sound business practices. The Company may use certain derivative financial instruments to manage risks of fluctuation in commodity prices, interest rates and foreign exchange rates. The Company mitigates its exposure to commodity price risk through several methods, including inventory management, purchase contracts, back-to-back buying and selling, and to a lesser extent hedging on regulated futures and options markets. The Company uses interest rate swap agreements to limit exposure to increases in interest rates and fix interest rates on certain portions of long-term debt. The Company may enter into foreign currency forward and option (floor and cap) contracts to limit exposure on certain anticipated future U.S. dollar cash flows in Canadian dollar functional currency companies. The Company is exposed to credit risk from its customers primarily in relation to accounts receivable. This risk is minimized by the Company's diverse customer base. The Company regularly performs credit assessments of its customers and provides allowances for potentially uncollectible accounts receivable.

3. Seasonality and commodity variability

The Company experiences seasonal variations in revenue. Historically, revenue is strongest in the second and third quarters, when the usually cold October through March weather creates increased demand for beef feed, low moisture supplement blocks and, to a lesser degree, dairy feed. Other product lines are only marginally affected by seasonal conditions.

Commodity-based agricultural raw materials constitute a significant component of the Company's complete feed production. Fluctuating commodity prices can influence revenues and associated cost of sales as selling prices and product costs move in relation to changes in commodity prices.

4. Accumulated other comprehensive income


                                                        Three Months Ended
                                                              September 30
                                                         2007         2006
                                                        ($000)       ($000)
---------------------------------------------------------------------------

Balance, beginning of period as previously reported         -            -

Unrealized gain on translation of financial statements
 of related entities with foreign functional currency
 to U.S. dollar reporting currency                     11,657       10,975
---------------------------------------------------------------------------
Restated balance, beginning of period                  11,657       10,975

Other comprehensive income (loss)                       2,216          (16)
---------------------------------------------------------------------------
Balance, end of period                                 13,873       10,959
---------------------------------------------------------------------------
---------------------------------------------------------------------------

The accumulated balances of other comprehensive income, are comprised entirely of the unrealized gain on translation of financial statements of related entities with foreign functional currency to U.S. dollar reporting currency.

5. Business acquisitions

There were no business acquisitions for the year to date in fiscal 2008 or 2007. Installments related to a fiscal 2006 acquisition have been paid in the first quarter of fiscal 2008 and 2007.

6. Statement of cash flow disclosures

The following amounts were paid on account of interest and taxes:


                                Three Months Ended
                                      September 30
                               2007           2006
                              ($000)         ($000)
---------------------------------------------------

Interest                        438            648
Income taxes, net of refund      71             70

7. Post retirement and pension expense

The Company's recorded estimated costs related to its non-contributory pension plans, post-retirement medical plan, and defined contribution plans are as follows:


                              Three Months Ended
                                    September 30
                               2007         2006
                              ($000)       ($000)
-------------------------------------------------

Non-contributory pension plan   345          319
Defined contribution plan       365          333

8. Gain on sale of facilities

Operating results of the Ridley Feed Operations segment in the first quarter of fiscal 2008 include pre-tax gains of $807,000 related to the sale of a premix facility and a fabrication shop, both of which are located in Winnipeg, Manitoba. Net proceeds on these sales are $2,441,000.

9. Litigation/Contingency

The actions by proposed representative plaintiffs continue against the Government of Canada and Ridley Inc. They seek to certify class actions in Alberta, Saskatchewan, Ontario and Quebec to include all Canadian cattle farmers who allegedly suffered damage as a result of international bans on trade in Canadian beef and cattle following the May 2003 diagnosis of Bovine Spongiform Encephalopathy (BSE) in a cow in Alberta. The Ontario action seeks a national class to include affected cattle farmers residing in the six remaining Canadian provinces.

The proposed representative plaintiffs seek general, special, aggravated and punitive damages on behalf of themselves and each of the proposed Canadian cattle farmer class members. Full particulars of the claims are yet to be provided.

In a decision released on June 15, 2007, the Superior Court of Quebec authorized the plaintiff to institute the action as a class action in Quebec. A notice to class members in Quebec was approved by the Court and published in September. A trial date in Quebec has yet to be scheduled. None of the remaining actions have been certified to proceed to trial as a class action in any other province. In Ontario, the Court of Appeal for Ontario dismissed each of the appeals by the parties against the decision to strike the claims in a decision released June 22, 2007. A hearing of the plaintiff's motion to certify the Ontario action as a class action has yet to be scheduled.

In September 2007, Ridley Inc. and the Government of Canada filed applications with the Supreme Court of Canada seeking leave to appeal from the decision of the Court of Appeal for Ontario denying the motions of Ridley and the Government of Canada to strike the claims of the Ontario plaintiff. The Court's decision on the leave applications is expected in 2008.

The actions in Saskatchewan and Alberta are in abeyance. There has been no decision made on the merits of the actions in any province. The lawsuits have been struck out or discontinued against Ridley Inc.'s majority shareholder, Ridley Corporation Limited, in all provinces.

At this time, the Company cannot determine what impact, if any, these lawsuits may have on it, or its future earnings, and no accruals have been made in respect of the actions. The Company believes that there is little prospect of any of its insurers responding favourably, and it will continue to fund the cost of the lawsuits from operating cash flow.

10. Segment information

The Company's operations are conducted in four reportable segments as: Ridley Feed Operations, Ridley Feed Ingredients, Ridley Nutrition Solutions, and Corporate. The Company reports information about its operating segments based on the way management organizes and reports the segments within the organization for making operating decisions and evaluating performance. Starting in this interim report, the Company is reporting the results of its Ridley Feed Ingredients (RFI) business unit as a separate reporting segment reflecting changes in how the Company evaluates its operations. Previously, RFI was included as part of Ridley Feed Operations. The prior year's segment results have been reclassified to conform to the current year reporting.

Ridley Feed Operations, which consists of both the U.S. and Canadian feed operations, manufactures and distributes livestock feed to customers primarily in the prairie region of Canada and the U.S. Midwest. The products include a full range of complete feeds and supplements and are marketed through a dealership network as well as directly to agricultural producers.

Ridley Feed Ingredients manufactures and distributes vitamin and trace mineral premixes, small packaged specialty products, medicated and non-medicated feed additives and micro feed ingredients.

Ridley Nutrition Solutions, which consists of the low moisture block operations, specialty products, Sweetlix feed supplements and the equine nutrition business, manufactures and distributes low moisture blocks, specialty products, feed supplements and premium quality equine feeds.

Corporate contains no substantial revenue and is comprised of corporate costs and other activities not specific to reportable segments and is shown separately.

The Company evaluates performance based on operating income. Operating income is defined as earnings before finance costs, interest income, and income taxes.

An analysis of segment information is as follows:


RIDLEY Inc.
Segment Information                   Ridley            Ridley
                                       Feed              Feed
Three months ended                  Operations       Ingredients
 September 30                    2007     2006     2007     2006     2007
                                ($000)   ($000)   ($000)   ($000)   ($000)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Revenue
Revenue from
 unafiliated customers        111,240   98,237   12,759   10,728   15,811
Intersegment revenues             810      873   11,281   10,143    6,520
--------------------------------------------------------------------------
Total revenue                 112,050   99,110   24,040   20,871   22,331
--------------------------------------------------------------------------

Cost of sales                  97,888   84,371   22,000   19,937   17,547
--------------------------------------------------------------------------

Gross profit                   14,162   14,739    2,040      934    4,784

Net operating expenses         10,648   12,329      739      614    3,550
--------------------------------------------------------------------------

Operating income/(expense)      3,514    2,410    1,301      320    1,234
--------------------------------------------------------------------------

Total assets                  161,481  152,668   24,196   18,867   62,878
Property, plant and equipment  67,314   69,360    2,980    2,860   23,267
Goodwill                       25,192   23,813    4,327    4,327   21,362



RIDLEY Inc.
Segment Information            Ridley        Corporate
                            Nutrition           and           Ridley Inc.
Three months ended          Solutions      Eliminations      Consolidated
 September 30                    2006     2007     2006     2007     2006
                                ($000)   ($000)   ($000)   ($000)   ($000)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Revenue
Revenue from
 unafiliated customers         15,471        -        -  139,810  124,436
Intersegment revenues           7,391  (18,611) (18,407)       -        -
--------------------------------------------------------------------------
Total revenue                  22,862  (18,611) (18,407) 139,810  124,436
--------------------------------------------------------------------------

Cost of sales                  17,452  (18,611) (18,407) 118,824  103,353
--------------------------------------------------------------------------

Gross profit                    5,410        -        -   20,986   21,083

Net operating expenses          3,177    1,214    1,560   16,151   17,680
--------------------------------------------------------------------------

Operating income/(expense)      2,233   (1,214)  (1,560)   4,835    3,403
--------------------------------------------------------------------------

Total assets                   61,450    3,142    4,671  251,697  237,656
Property, plant and equipment  23,855        4        6   93,565   96,081
Goodwill                       21,362        -        -   50,881   49,502



                                          Three Months Ended
                                                September 30
(Expressed in thousands of U.S. dollars)    2007        2006
------------------------------------------------------------

Revenue from unaffiliated customers
 U.S.                                    106,095      93,866
 Canada                                   33,715      30,570
------------------------------------------------------------
                                         139,810     124,436

Property, plant and equipment
 U.S.                                     67,140      67,078
 Canada                                   26,425      29,003
------------------------------------------------------------
                                          93,565      96,081

Goodwill
 U.S.                                     37,983      37,982
 Canada                                   12,898      11,520
------------------------------------------------------------
                                          50,881      49,502

11. Comparative Amounts

The comparative amounts have been reclassified to conform to the current period presentation.


FOR FURTHER INFORMATION PLEASE CONTACT:

Ridley Inc.
Steve VanRoekel
President and CEO
(507) 388-9412





Ridley Inc.
Mike Mitchell
Chief Financial Officer
(507) 388-9410


Website: www.ridleyinc.com

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