MRRM Inc. - Directors' report and management discussion and analysis of the financial condition and results of operations - Interim 2008.Q3 - November 30, 2007



    The following discussion and analysis should be read in conjunction with
    the preceding year's Annual Report. The Company's interim quarterly
    statements for fiscal year 2008 are for the quarter ended as indicated
    above. Included in these documents may be forward-looking statements with
    respect to the Company. These forward-looking statements by their nature
    necessarily involve risks and uncertainties that could cause actual
    results to differ materially from those contemplated by such statements.
    The Company considers the assumptions on which these forward-looking
    statements are based to be reasonable at the time they were prepared but
    cautions the reader that these assumptions regarding future events, many
    of which are beyond the control of the Company, may ultimately prove to
    be incorrect.

    The unaudited interim consolidated financial statements were prepared by
    the Company in accordance with Canadian generally accepted accounting
    principles and have not been reviewed by the Company's auditors. Certain
    comparative figures have been reclassified to conform with the
    presentation adopted in the financial statements.

    Additional documents and information are available at the System for
    Electronic Document Analysis and Retrieval (SEDAR) and can be assessed
    through the internet: For MRRM's profile goto www.sedar.com or for
    documents goto www.sedar.com Information is also available on the
    Corporate website at www.MRRM.ca .

    MONTREAL, Jan. 10 /CNW Telbec/ -

    Consolidated  Earnings

    Revenues for this period compared to this period (last year) were
$38,121,000 ($37,194,000), an increase of $927,000 (2.5%). As shown in the
segmented information, revenue from operating activities amounted to
$37,929,000 ($37,001,000) being 99.5% (99.5%) of total revenues. Income from
corporate totaled $192,000 ($193,000). Operating revenues increased by
$928,000 (2.5%) compared to last year. Revenue from Corporate decreased by
$1,000.
    Costs and expenses for this period (last year) were $37,610,000
($36,634,000), an increase of $976,000 (2.7%). Costs related to operating
activities, before exchange and interest, increased by $979,000 (2.7%).
Expenses related to corporate, excluding the change in fair value of
marketable securities, increased by $24,000. Cost of sales increased in
relation to sales and margins continued to improve slightly when compared to
the last fiscal quarter. The increase in amortization of $102,000 is primarily
related to the Time-Wise project. Investment tax credits of $251,000 were
recorded compared to $232,000 last year. Overall selling and administrative
expenses increased slightly compared to last year and include a significant
investment in listing fees attributable to the retail branding of Time-Wise.
    Operating results are discussed later on in this report.
    The impact of the fluctuating Canadian dollar combined with a shift in
the company's position of US dollars resulted in a currency exchange gain of
$21,000 for the period compared to a loss last year of $37,000. As disclosed
in the Notes, the net exposures were as follows: at November 30, 2007,      
US($440,000) & November 30, 2006, US($5,616,000); at August 31, 2007,       
US$439,000; & August 31, 2006, US($1,546,000), at May 31, 2007, US$1,050,000 &
at May 31, 2006, US($3,437,000) and at February 28, 2007, US($1,148,000). The
above US dollars include the equivalents for euros and pounds sterling which
are not material. No exchange futures were outstanding at this period-end.
    Interest expensed on bank indebtedness and the reducing term loan
amounted to $217,000 compared to $186,000 last year for an increase of
$31,000. Interest of $48,000 pertaining to the Time-Wise project was
capitalized in the first quarter compared to $66,000 that had been capitalized
last year. Total interest accrued and paid amounted to $265,000, an increase
of $13,000 compared to last year. Interest related to the long-term debt was
$143,000.

    Change in fair value of investments held for trading

    During the first quarter, as disclosed in the Notes to the Consolidated
Financial Statements (Notes), the Company adopted section 3855 of the
CICA Handbook, Financial Instruments - Revenue Recognition. This new standard
requires that the marketable securities be recorded at fair value. The Change
in fair value of investments held-for-trading, which records this adjustment
for the current period, is presented in the statement of earnings as a
separate item. Based on overall market conditions, this adjustment for the
current period resulted in a negative impact of $186,000.
    The Earnings before income taxes for this period were $325,000 compared
to $560,000 last year, a decrease of $235,000. Earnings from operating
activities were $464,000 ($488,000), a decrease of $24,000 and corporate,
excluding the change in fair value of investments, were $47,000 ($72,000), a
decrease of $25,000. The change in fair value of investments decreased
earnings by $186,000 for this period.
    Income taxes for the period were $121,000 ($168,000). The effective tax
rates for this period of 28.9% compared to 30.4% last year are presented in
the Notes to the financial statements.
    Net Earnings for the period were $204,000 ($392,000) or $0.08 ($0.15) per
share.
    Dividends paid during the period amounted to $127,000 ($380,000). As
indicated in the MD&A for the first quarter, the declaration of the quarterly
dividend has been suspended in order to support the cash requirements
resulting from the Time-Wise investment. The declaration and payment of
dividends is at the discretion of the Board of Directors.

    Summary of Quarterly Results

    The following financial summary is derived from the company's financial
statements for each of the eight most recently completed fiscal quarters.

    
    Summary of
    Quarterly
    Financial
    Results for
    the eight
    most      Nov 30, Aug 31, May 31, Feb 28, Nov 30, Aug 31, May 31, Feb 28,
    recent      2007    2007    2007    2007    2006    2006    2006    2006
    fiscal     (2008.  (2008.  (2008.  (2007.  (2007.  (2007.  (2007.  (2006.
    quarters      Q3)     Q2)     Q1)     Q4)     Q3)     Q2)     Q1)     Q4)
              ------- ------- ------- ------- ------- ------- ------- -------
                   $       $       $       $       $       $       $       $
    (Expressed
    in thousands,
    except for
    amounts per
    share -
    unaudited)
    -------------------------------------------------------------------------
    Revenues  12,524  12,885  12,712  13,262  13,489  11,726  11,979  11,446
    Net
     Earnings
     (loss)      214     121    (131)    701     179     277     (64)    402
    Earnings
     (loss)
     per share  0.08    0.05   (0.05)   0.28    0.07    0.11   (0.03)   0.15
    Dividends
     per share  0.00    0.00    0.05    0.20    0.05    0.05    0.05    0.20


    Revenues for this quarter were $12,524,000 ($13,489,000), a decrease of
$965,000 (-7.2%). Revenue from operating activities amounted to $12,450,000
($13,441,000) being 99.4% (99.6%) of total revenues. Income from corporate
totaled $74,000 ($48,000). Operating revenues for the quarter decreased by
$991,000 (-7.4%) compared to this quarter last year. Revenue from Corporate
increased by $26,000 mainly attributable to realizing more capital gains this
quarter compared to this quarter last year.
    Costs and expenses for the quarter were $12,131,000 ($13,227,000), a
decrease of $1,096,000 (-8.3%). Costs related to operating activities, before
exchange and interest, decreased by $1,079,000 (-8.2%). Initial investments in
listing fees and other marketing activity applicable to the Time-Wise product
line were recorded last quarter and these expenditures continued into this
quarter; including these investments, overall expenses were reduced slightly
for the quarter.
    Included in the financial results for this quarter are investment tax
credits of $151,000 comprised of a balance of $35,000 for the Federal claim
pertaining to fiscal year 2007 (a total of $281,000 relating to that claim has
been realized) and an accrual of $116,000 pertaining to outstanding Ontario
claims for 2006 and 2007. These claims have been accrued at 50%. The accrual
in this quarter last year was $132,000 pertaining to fiscal year 2006.
    The currency exchange in this quarter resulted in a gain of $3,000
compared to a loss this quarter last year of $36,000, a variance of $39,000.
    Interest expense for this quarter was $76,000 compared to $58,000 this
quarter last year and was $94,000 in 2008.Q2 and $47,000 in 2008.Q1.
    Change in fair value of investments held for trading for the quarter had a
negative impact on earnings of $68,000.
    Earnings before income taxes for this quarter were $325,000 compared to
$262,000 last year, an increase of $63,000. Earnings from operating activities
were $361,000 ($252,000), an increase of $109,000 and corporate, excluding the
change in fair value of investments, were $32,000 ($10,000), an increase of
$22,000. The change in fair value of investments decreased earnings by $68,000
for this quarter.
    Income taxes for the quarter were $111,000 ($83,000). Please refer to the
Notes to the consolidated financial statements for the explanation of the
changes in the effective tax rates.
    Net earnings for the quarter were $214,000 ($179,000) or $0.08 ($0.07) per
share.

    Consolidated Cash Flows, Liquidity and Balance Sheets

    Cash generated by operating activities before changes for non-cash items
was $204,000 for the period compared to $392,000 last year from Net earnings.
Non-cash operating items used $1,101,000 for the period compared to $828,000
generated last year. The usage of funds mainly related to increased
receivables during the period, to agency accounts during the quarter and to
payments of payables relating to capital and inventory purchases outstanding
at last year-end offset partially by a reduction in current inventories.
Changes in the accrued benefit liabilities include payments on the SERP which
commenced in Q2 this year and a reduction in the liability reflecting a
revised actuarial calculation during the period.
    In investing activities, the Company added $773,000 of net property, plant
and equipment of which $319,000 was used for the investment in the new value
added Time-Wise rice line, for a total investment since inception of
$3,626,000 against an approved budget of $3.6M. This total includes
capitalized interest of $156,000. The project became available for production
during the second quarter of the current fiscal year. Total capital
investments this quarter amounted to $286,000. The net activity in marketable
securities is primarily attributable to renewals of investments in cash and
equivalents.
    In financing activities, bank indebtedness increased by $2,407,000 to
cover the $897,000 of operating activities as well as the $893,000 of
investing activities and the long-term debt and dividend payments. The first
payments aggregating $490,000 were made on the long-term reducing debt and a
first quarter dividend was disbursed of $127,000. Long-term debt payments this
quarter were $167,000.
    Working capital amounted to $1,141,000 at the end of this period, a
decrease of $570,000 compared to the $1,711,000 at last fiscal year-end. This
change was attributable to the investing and financing activities and net
working capital used in operations.

    Available credit facilities

    The credit facilities available and reported at last year-end remain
unchanged. The facilities are comprised of a revolving line of credit for
$4,750,000 CDN {or its US equivalent} and a 5 year reducing term facility
initially borrowed at fiscal year-end 2007 for $3,500,000. The revolving line
of credit bears interest at either the Canadian prime and/or U.S. base rates
and optionally the Company may take advantage of Bankers Acceptances. The
reducing term facility is at a combined fixed rate for interest and fees of
5.83% for the term of the loan. The financial covenants and arrangements
relating to these facilities are detailed in the Notes to the audited
consolidated financial statements filed for last year-end. These covenants are
being respected and have been met.
    Receivables increased by $1,205,000 compared to last fiscal year-end. The
regular account balances are substantially current, there are no anticipated
serious collection issues and any potential write-offs have been provided for
in the accounts.
    Inventories decreased by $1,264,000 (-18.4%) while overall volumes of rice
and components decreased by 30.0%. The decrease related mainly to bulk rice
and is in-line with normal averages.
    Marketable securities, effective the first quarter, are recorded at fair
value in accordance with the new Financial Instruments - Revenue Recognition
standard discussed above. As at the close of this quarter, the adjustment for
the unrealized gain amounted to $963,000 of which $1,149,000 pertained to the
balance sheet at last fiscal year-end and was, net of future taxes, accounted
for in opening Retained Earnings. The adjustment for this period was a
reduction of $186,000 and was attributable to market losses in the last two
quarters ($68,000 for this quarter) relating generally to reduced values in
the American and Foreign equity markets. The investment mix has been generally
maintained through these market changes. Marketable securities at February 28,
2007 were recorded at cost.
    Property, plant and equipment decreased by $29,000 this balance being a
net of $773,000 of additions less $802,000 of amortization. The new Time-Wise
project came on-line in June of last quarter.
    Bank indebtedness was $3,805,000 compared to $1,398,000 at last year-end.
The increase of $2,407,000 is explained under financing activities.
    Payables decreased by $1,660,000, mainly due to decreased inventories.
    Accrued benefit liability decreased to reflect a revised actuarial
calculation and includes imputed interest. Payments from the "SERP",
Supplemental Executive Retirement Plan, began in July of this year.
    Long-term debt is being repaid in accordance with the arrangements of the
five year reducing term facility agreement as described under credit
facilities.
    Future income taxes, net liability, increased by $115,000 including a
charge of $154,000 for the fair value adjustment pertaining to the unrealized
gain at November 30, 2007.
    Shareholders' equity increased by $1,042,000 to $16,934,000 from
$15,892,000 and represents $6.68 ($6.27) per share.
    Capital stock remained unchanged at $539,000 and represents 2,535,000
issued common shares.
    Retained earnings were adjusted in accordance with the required accounting
for the marketable securities at fair value. The opening balance was increased
by $965,000 being the unrealized gain at last fiscal year-end of $1,149,000
less the applicable future income taxes of $184,000.

    The MRRM Inc. shares have a very limited distribution and are
    infrequently traded on the TSX-Venture Exchange under the symbol MRR.
                                                www.TSX-Venture Exchange

    Discussion of Results:

    In Dainty Foods, net sales increased by $1,090,000 (3.1%) to $36,389,000
for the period and decreased by $972,000 (-7.6%) to $11,830,000 for the
quarter compared to last year. Overall rice volumes decreased by 3.4% for the
period and 7.8% for the quarter. Costs and expenses increased by $911,000
(2.6%) for the period and decreased by $1,091,000 (-8.6%) for the quarter.
Earnings before income taxes for the period increased by $179,000 to $341,000
and by $119,000 to $188,000 compared to this quarter last year.
    The increases in sales and costs for the period were mainly attributable
to increases in the price of bulk rice compared to last year. During the
quarter, sales were impacted by pricing pressures on the bulk and bagged
items. As indicated in the last Annual Report and MD&A, the cost of rice had
been tracking at ten year highs leading into this fiscal year with little
likelihood that this was to change in the near future; the current situation
is that the USA rough rice farm price is at the highest on record while milled
rice prices have maintained thirteen year highs. There are no strong
indicators that this situation will change in the coming quarter and pressures
on pricing, especially on the bulk and bagged items, remains very competitive.
Recent selling price increases in our branded and private label items have
somewhat offset the commodity increases and price increases have been
introduced in this quarter for the canned rice products. The canned rice price
had not been increased for many years and the price increases are intended to
ensure these products continue to be considered as very good value by our
loyal consumers. The timing of this price increase resulted in an increased
retail sales at the end of the last quarter with an offsetting impact on this
quarter's volume. The overall effect of this change in price strategy will
become apparent during the next few months.
    Operating production, selling and administrative expenses have been
reduced for the period and this helped to offset the increased pressure on
pricing. The investment in the new Time-Wise rice line continues to produce
encouraging results and, while the Company anticipates this value added
product line will be a good contributor to margins, it will not show
significant returns this year. The Canadian retailers have listed a number of
Dainty "Stock Keeping Unit of Measure" (SKUs) and have or are in the process
of arranging for a number of selected private label items. A major investment
in listing fees and marketing expenses has been recorded during these past two
quarters and no major additional investments in these areas are contemplated
for the balance of this year. Shipments are expected to grow over the
remainder of this fiscal year but with more noticeable growth into next year.
    As previously indicated, highlights of the Time-Wise product line are:
cooks like pasta, decreases the preparation time of traditional parboiled rice
from 20 minutes to 10 minutes and whole grain brown parboiled rice from
45 minutes to 15 minutes and does not contain additives. The new product line
is intended to target different market segments than our Dainty canned rice.
    As indicated above, sales volumes are tracking below last year. This
pertains mainly to bulk and bagged rice shipments and sales within these
markets remain extremely competitive. The company continues to pursue new
value-added retail type products some of which will be outsourced until
volumes and economies develop to a point where in-house production is viable.
This outsourcing will minimize capital investment while enhancing Dainty
Foods' offerings in the retail marketplace for both private and control label
items as well as branded items. New selling relationships are also being
developed that are intended to add strength to our retail sales efforts.
    In Robert Reford, revenue decreased by $162,000 (-9.5%) to $1,540,000 for
the period and by $19,000 (-3.0%) to $620,000 for the quarter compared to last
year. As indicated in the MD&A for 2008.Q2, an overall reduction in container,
bulk and tanker activity has had a significant impact on the revenue levels of
the business, especially in the prior two quarters. The industry is
experiencing a significant downturn in imports to the Great Lakes and
movements related to our ship operators servicing the steel industry for both
the USA and Canada have experienced significant reductions in activity as
well. This situation, along with a decrease in other commodities, has resulted
in significant decreases in ships transiting the seaway and consequently in
revenue levels. During the second quarter, a major account serviced by
Furncan-Reford in the Maritimes discontinued its world service with a call to
the port of Halifax due to reduced cargo volumes. A partial service has been
maintained and Reford continues to act as agent for this account. Revenue
levels and operating expenses were slightly reduced.
    Earnings before income taxes for the period decreased by $203,000 to
$123,000 and by $10,000 to $173,000 compared to this quarter last year; the
fourth quarter is traditionally slow due to the seasonal closure of the seaway
and no unusual activity is anticipated through to next season.
    As reported previously, during the past several months a detailed study
had taken place within the Operations department to determine what can be done
to improve operational efficiencies by standardizing agency document
processing with the aid of software enhancements to our systems as well as to
fully integrate the various related functions. As a result of this work
significant development has been done in-house on the agency accounting phase
of the project which was released during the second quarter. The project with
Innovation Maritime, a non-profit corporation recognized by the Quebec
ministry of education as a college teaching center to produce the
documentation and scheduling phases of this effort, continues to progress as
planned. The cost will be approximately $120,000 and is to be amortized over
four years. The release of these phases is scheduled for next March.
    Since interest and exchange are accounted for on a consolidated basis,
exchange and earned interest attributed to ship agency services are allocated
to agency revenue and interest income is netted under costs and expenses.

    In Corporate Investments,  portfolio income is summarized as follows:

                                                          2008          2007
                                                         ------        ------
    Dividend income                                  $  83,000     $ 112,000
    Interest income                                  $  39,000     $  41,000
    Capital gains                                    $  70,000     $  40,000
    Unrealized change in Fair Value                 -$ 186,000            -
                                                   ------------  ------------
                                                   ------------  ------------
    Totals:                                          $   6,000     $ 193,000
                                                   ------------  ------------


    Certification

    The Company's management, under the direction and supervision of the Chief
Executive Officer and Chief Financial Officer, continually evaluates the
effectiveness of the Company's disclosure controls and procedures and has
concluded that such disclosure controls and procedures are effective.
    The Company's management is also responsible for establishing and
maintaining internal controls over financial reporting. These controls were
designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with Canadian GAAP.
    There have been no changes in the Company internal controls over financial
reporting during this quarter that have materially affected, or are reasonably
likely to materially affect, its internal control over financial reporting.

    Outlook

    Indications are that the Time-Wise products will provide additional
growth, that the current rice market provides an environment to secure rice at
competitive prices and economic conditions are likely to support growth in the
food processing and selling operations. The markets that the ship agency
services operate in have experienced a very slow start in the first half of
this year and while this quarter offered some improvement, no significant
turn-around is expected. Overall the current expectation is for the company to
achieve satisfactory levels of profitability in the rice processing division.
However the agency division will not match last year's level of performance.
    While the Company is anticipating continued growth in food processing and
selling, and while it will be maintaining a strong position within the ship
agency services business, actual growth attained in 2008 and into fiscal 2009
will be impacted by several factors including (i) the demand for our new
Time-Wise value added products (ii) the ability of the Company to secure rice
from U.S. rice mills at competitive prices (iii) the ability within the
marketplace to obtain price increases in a timely manner to cover increased
costs, and (iv) general economic conditions.

    Risks and Uncertainties

    Overview

    Management of risk includes properly identifying, communicating and
controlling the risks which may cause a serious impact to the business.
Management is confident that the Company employs effective procedures to
address all material risks.
    The following items were discussed in the MD&A in the last Annual Report
and remain principally unchanged. Please refer to these documents for this
information.

      Ability to Achieve Revenue Results
      Ability to Address Cost and Expense Concerns
      Economic Conditions
      Environment

    In Recognition

    Mr. Robert Blanchard, our CEO, retired on June 30th, 2007 after 16 years
of service to the Company. We thank Mr. Blanchard for guiding us so diligently
during his tenure and wish him many happy and healthy years of retirement.
    Mr. Terry Henderson, President of Dainty Foods, assumed the responsibility
as MRRM's CEO at the Meeting of the Board of Directors following the last
Annual General Meeting in June 2007.
    Mr. David Wayland, our CFO who has been with the company since 1976, is
planning for retirement within the next year. We are pleased to report that
Mr. Louis (Lou) Younan joined the company in September of this year and was
hired to fill this function . Lou is located in the Windsor office and had
been working in the food industry for over twenty-two years, acting as CFO of
a major food processor for nine years.
    We are extremely proud to report that on February 23, 2007 MRRM Inc.
celebrated its 125th anniversary of continuous operation under its own name
and that of its predecessor corporation, Mount Royal Rice Milling and
Manufacturing Company, and Mount Royal Rice Mills Limited. We are very
grateful and wish to say a special thank you to all those directly associated
with the Company presently and in the past as well as our loyal customers and
suppliers who have made the achievement of 125 years of survival and success a
reality.


    On behalf of the Board

    (signed)                     (signed)

    Nikola M. Reford             Terry Henderson
    Chairman                     President & Chief Executive Officer

    Dated at Montreal (Westmount), Quebec,  January 10, 2008.


    MRRM Inc.
    CONSOLIDATED EARNINGS
    And RETAINED EARNINGS

    -------------------------------------------------------------------------
    (unaudited)       For the NINE Months Ending      For the Quarter Ending
                     ----------------------------    ------------------------
                       November 30,  November 30,  November 30,  November 30,
                       ------------  ------------  ------------  ------------
                              2007          2006          2007          2006
                             ------        ------        ------        ------
                              '000          '000          '000          '000

    Revenues
      Sales                 37,929        37,001        12,450        13,441
      Interest and
       investment income       122           153            41            50
      Gain on disposal of
       marketable securities    70            40            33            (2)
                       ------------  ------------  ------------  ------------

                            38,121        37,194        12,524        13,489
                       ------------  ------------  ------------  ------------

    Costs and expenses
      Cost of sales,
       selling and
       administrative       36,612        35,711        11,778        12,900
      Amortization             802           700           280           233
      Exchange loss (gain)     (21)           37            (3)           36
      Interest expense (a)     217           186            76            58
                       ------------  ------------  ------------  ------------

                            37,610        36,634        12,131        13,227
                       ------------  ------------  ------------  ------------
    Earnings before the
     following item            511           560           393           262
      Change in fair value
       of investments held
       for trading            (186)            0           (68)            0
                       ------------  ------------  ------------  ------------
    Earnings before income
     taxes                     325           560           325           262

    Income taxes (recovery)
      Current                  190            40           200            28
      Future                   (69)          128           (89)           55
                       ------------  ------------  ------------  ------------
                               121           168           111            83
                       ------------  ------------  ------------  ------------

    Net earnings               204           392          $214          $179
                                                   ------------  ------------
                                                   ------------  ------------

      Retained earnings,
       beginning of year    15,353        15,147
      Adjustment to fair
       value for
       investments held
       for trading             965             0
                       ------------  ------------

                            16,522        15,539

      Dividends                127           380            $0          $127
                       ------------  ------------  ------------  ------------
                                                   ------------  ------------

    Retained earnings,
     end of period         $16,395       $15,159

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


    Basic earnings per
     share                   $0.08         $0.15         $0.08         $0.07
                             ------        ------        ------        ------
                             ------        ------        ------        ------

    -------------------------------------------------------------------------
    (a) Additional information is included in the Notes to Consolidated
        Financial Statements.


    MRRM Inc.
    CONSOLIDATED CASH FLOWS

    -------------------------------------------------------------------------
    (unaudited)       For the NINE Months Ending      For the Quarter Ending
                     ----------------------------    ------------------------
                       November 30,  November 30,  November 30,  November 30,
                       ------------  ------------  ------------  ------------
                              2007          2006          2007          2006
                             ------        ------        ------        ------
                              '000          '000          '000          '000
    OPERATING ACTIVITIES
    Net earnings               204           392           214           179
    Non-cash items
      Change in fair
       value of invest-
       ments held for
       trading                 186             0            68             0
      (Gain) on
       disposal of
       marketable
       securities              (70)          (40)          (33)            2
      Amortization             802           700           280           233
      Accrued benefit
       cost                     27           199             8            66
      Future income
       taxes                   (69)          127           (89)           55
                              -----         -----         -----         -----
                             1,080         1,378           448           535
      Change in
       receivables          (1,205)          (23)         (587)         (217)
      Change in
       inventories           1,264        (1,089)         (783)         (774)
      Change in tax
       credits
       receivable             (335)         (220)         (241)         (120)
      Change in
       prepaids                (41)          (88)         (124)         (167)
      Change in
       payables             (1,660)        1,200           562           859
      Change in income
       taxes payable           102            62           282            48
      Change in current
       portion of
       long-term
       liabilities              43             0            25             0
      Change in accrued
       long-term benefit
       liability              (145)            0           (35)            0
                       ------------  ------------  ------------  ------------
    Cash flows from
     operating
     activities (a)           (897)        1,220          (453)          164
                       ------------  ------------  ------------  ------------

    INVESTING ACTIVITIES
    Marketable securities   (2,015)       (3,342)       (1,009)       (1,415)
    Disposal of marketable
     securities              1,895         3,203           970         1,368
    Property, plant and
     equipment                (773)       (3,238)         (286)       (1,167)
    Disposal of equipment        0            15             0             5
                       ------------  ------------  ------------  ------------

    Cash flows from
     investing activities     (893)       (3,362)         (325)       (1,209)
                       ------------  ------------  ------------  ------------

    FINANCING ACTIVITIES
    Bank indebtedness        2,407         2,522           945         1,172
    Long-term debt            (490)            0          (167)            0
    Dividends                 (127)         (380)            0          (127)
                       ------------  ------------  ------------  ------------
    Cash flows from
     financing activities    1,790         2,142           778         1,045
                       ------------  ------------  ------------  ------------

    Net change in cash           0             0             0             0

    Cash, beginning of
     period                      0             0             0             0
                       ------------  ------------  ------------  ------------

    Cash end of period          $0            $0            $0            $0

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

    Dividends per share      $0.05         $0.15         $0.00         $0.05
                             ------        ------        ------        ------
                             ------        ------        ------        ------

    -------------------------------------------------------------------------
    (a) Additional information is included in the Notes to Consolidated
        Financial Statements.


    MRRM Inc.
    (Formerly: Mount Royal Rice Mills Limited)
    CONSOLIDATED BALANCE SHEETS

    -------------------------------------------------------------------------
    (unaudited)                                          As at         As at
                                                  November, 30   February 28
                                                  -------------  ------------
                                                          2007          2007
                                                          '000          '000
    ASSETS
    Current
      Receivables                                        5,566         4,361
      Inventories                                        5,618         6,882
      Tax credits receivable                             1,287           952
      Prepaids                                             261           220
      Future income taxes                                   22            17
                                                   ------------  ------------
                                                        12,754        12,432

    Marketable securities, at fair value (note 1)        5,015         3,862

    Property, plant and equipment, net                  15,900        15,929
                                                   ------------  ------------

                                                       $33,669       $32,223
                                                   ------------  ------------
                                                   ------------  ------------

    LIABILITIES
    Current
      Bank indebtedness                                  3,805         1,398
      Payables                                           6,797         8,457
      Income taxes                                         291           189
      Current portion of long-term liabilities             720           677
                                                   ------------  ------------
                                                        11,613        10,721
    Accrued long-term benefit liability                    654           772
    Long-term debt, reducing term loan maturing
     in 2012                                             2,389         2,879
    Future income taxes                                  2,079         1,959
                                                   ------------  ------------

                                                        16,735        16,331
                                                   ------------  ------------
    SHAREHOLDERS' EQUITY

    Capital stock
      Common shares, without nominal or par value
       authorized in an unlimited number
      Issued            2,535,000 shares                   539           539

    Retained earnings                                   16,395        15,353
                                                   ------------  ------------
                                                        16,934        15,892
                                                   ------------  ------------

                                                       $33,669       $32,223
                                                   ------------  ------------
                                                   ------------  ------------

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



    MRRM  Inc.
    NOTES To CONSOLIDATED FINANCIAL STATEMENTS

    -------------------------------------------------------------------------
    (unaudited)

    1- Accounting Policies and Supplementary Information

    The unaudited interim consolidated financial statements were prepared by
the Company in accordance with Canadian generally accepted accounting
principles and have not been reviewed by the Company's auditors.
    The accounting policies and procedures used in preparing these unaudited
interim consolidated financial statements are the same as those used in
preparing the audited annual consolidated financial statements for the year
ended February 28, 2007, except for the accounting for changes in the value of
the marketable securities as explained hereunder. These unaudited interim
statements should be read along with the audited annual statements and notes
included in the Company's last Annual Report. Certain comparative figures have
been reclassified to conform with the presentation adopted at last fiscal
year-end.
    As referenced in the Notes to Consolidated Financial Statements for the
last fiscal year, effective with the beginning of the current year, the
Company adopted Section 3855 of the CICA Handbook, Financial Instruments -
Recognition and Measurement. Under this new standard, all financial assets
must be classified as held for trading, held-to-maturity, loans and
receivables or available for sale. All financial liabilities are classified as
held for trading or other financial liabilities.
    The portfolio of Marketable securities has been designated as a financial
asset held for trading. These investments are recorded at fair value based on
the current bid price at the balance sheet date with fair value changes
recorded and disclosed in the Statement of Earnings.
    The application of the new accounting policy resulted in an increase to
the investment asset of $963,000, an increase to the Future income tax
liability of $154,000 and an increase to beginning Retained Earnings of
$965,000 (being the unrealized gain at last fiscal year-end of $1,149,000 less
applicable future income taxes of $184,000). For this period, the change in
fair value is negative and amounts to $186,000; this has been included in the
future income tax calculation.
    The Company uses an interest rate swap arrangement through its bankers to
effectively fix the variable rate pertaining to the Reducing term loan which
matures in February 2012. This arrangement has fixed the interest rate at
5.83% to maturity. Were the Company to settle this swap agreement at the
reporting date, the estimated fair value based on quotes received from the
Company's lender would be unfavorable by $20,700, this value was favorable by
$16,400 at the end of the previous quarter and also favorable by $17,900 at
the end of the first quarter. The position at February 28, 2007 was
unfavorable by $29,600. These amounts are before income taxes and have not
been recorded in the financial statements.
    The Company is subject to debt covenants related to the revolving line of
credit and to the reducing long-term loan. These covenants are being respected
and have been met.
    Foreign exchange exposure: At November 30, 2007, net US($440,000); at
November 30, 2006, net US($5,616,000); at August 31, 2007, net US$439,000; at
August 31, 2006, net US($1,546,000), at May 31, 2007, net US$1,050,000; at
May 31, 2006, net US($3,437,000) and at February 28, 2007, net US($1,148,000).
The above US numbers include equivalent for euro and pounds stirling which are
not material. No exchange futures were outstanding at the end of the quarter.


                      For the NINE Months Ending      For the Quarter Ending
                     ----------------------------    ------------------------
                       November 30,  November 30,  November 30,  November 30,
                       ------------  ------------  ------------  ------------
                              2007          2006          2007          2006
                             ------        ------        ------        ------
                              '000          '000          '000          '000

    2- Information
        included in the
        Statement Of
        Earnings
      Income taxes paid
       (received)             $154           $36          ($56)         ($20)
                             ------         -----         -----         -----
      Investment tax credit   $251          $232          $151          $132
                             ------        ------        ------        ------

      Interest on long-term
       debt                   $143            $0           $44            $0
      Interest on bank
       indebtedness and
       other                  $122          $252           $32          $124
                             ------        ------         -----        ------
      Total Interest paid     $265          $252           $76          $124
      Less, interest
       capitalized             $48           $66            $0           $66
                              -----         -----          ----         -----
      Interest expensed       $217          $186           $76           $58
                             ------        ------         -----         -----
                             ------        ------         -----         -----

    3 - Income Taxes
      Combined basic federal
       and provincial income
       tax rate               $107          $191           107            90
      Non-taxable portion
       of capital (gains)
       losses                  $19           -$8             6            -1
      Tax-free income (net)   -$27          -$43            -8           -17
      Other                    $22           $28             6            11
                              -----         -----           ---          ----
                              $121          $168           111            83
                             ------        ------         -----          ----
                             ------        ------         -----          ----
      Effective tax rate      28.9%         30.4%         31.6%         34.0%
                             ------        ------        ------        ------
                             ------        ------        ------        ------

    4- Segmented Information
      Revenue
        Food processing
         and selling        36,389        35,299        11,830        12,802
        Ship agency
         services            1,540         1,702           620           639
                            -------       -------         -----         -----
        Operating           37,929        37,001        12,450        13,441
        Corporate              192           193            74            48
                              -----         -----          ----          ----
                           $38,121       $37,194       $12,524       $13,489
                           --------      --------      --------      --------
                           --------      --------      --------      --------
      Earnings
        Food processing
         and selling           341           162           188            69
        Ship agency
         services              123           326           173           183
                              -----         -----         -----         -----
        Operating              464           488           361           252
        Corporate               47            72            32            10
                               ----          ----          ----          ----
        Earnings before the
         following item        511           560           393           262
        Change in fair
         value of invest-
         ments held for
         trading              (186)            0           (68)            0
                             -------          ---         ------          ---
        Earnings before
         income taxes          325           560           325           262
        Income Taxes           121           168           111            83
                              -----         -----         -----          ----

      Net Earnings            $204          $392          $214          $179
                             ------        ------        ------        ------
                             ------        ------        ------        ------

      Assets
        Food processing
         and selling        27,427        27,318         1,175         2,302
        Ship agency
         services            1,233         1,215           548          (102)
                            -------       -------         -----        ------
        Operating           28,660        28,533         1,723         2,200
        Corporate            5,009         3,885            22            52
                            -------       -------          ----          ----
                           $33,669       $32,418        $1,745        $2,252
                           --------      --------       -------       -------
                           --------      --------       -------       -------

      Capital expenditures
        Food processing
         and selling           770         3,228           285         1,165
        Ship agency services     3            10             1             2
                                ---          ----           ---           ---
        Operating              773         3,238           286         1,167
        Corporate                0             0             0             0
                                ---           ---           ---           ---
                              $773        $3,238          $286        $1,167
                             ------      --------        ------      --------
                             ------      --------        ------      --------

      Amortization
        Food processing
         and selling           775           670           271           223
        Ship agency services    27            30             9            10
                               ----          ----           ---          ----
                              $802          $700          $280          $233
                             ------        ------        ------        ------
                             ------        ------        ------        ------

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




For further information:

For further information: D.M. Wayland, Secretary-treasurer & CFO, MRRM 
Inc., (514) 908-7777, Fax: (514) 906-0220, mr@mrrm.ca

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