MRRM Inc. - Directors' report and management discussion and analysis of the financial condition and results of operations - Interim 2010.Q1 - May 31, 2009 (1st Quarter)



    
    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 2010 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 go to www.sedar.com or for
    documents go to www.sedar.com Information is also available on the
    Corporate website at www.MRRM.ca.
    

    MONTREAL, June 18 /CNW Telbec/ -

    Consolidated Earnings And Comprehensive Income and Retained Earnings
    ---------------------------------------------------------------------

    Revenues for the period (last year) were $17,490,000 ($13,562,000)
increasing by $3,928,000 (29.0%). As shown in the segmented information, sales
and income from operating activities amounted to $17,148,000 ($13,429,000)
being 98.0% (99.0%) of total revenues. Income from corporate totaled $342,000
($133,000). Unrealized gains in fair market value of the portfolio amounted to
$357,000 ($108,000). Operating Revenues increased by $3,719,000 (27.7%)
compared to last year. Revenue from Corporate increased by $209,000 of which
$249,000 was attributable to an increase in unrealized fair value of
investments held for trading.
    Costs and expenses for the period (last year) were $17,057,000
($13,422,000), an increase of $3,635,000 (27.1%). Costs related to operating
activities, before exchange and interest, increased by $3,597,000 (27.0%).
Expenses related to corporate increased by $32,000.

    Operating results are discussed later on in this report.

    The impact of the fluctuating Canadian dollar resulted in a total
currency exchange loss of $90,000 (all included under cost of sales) versus a
gain of $91,000 ($40,000 included under cost of sales) for the period last
year. As disclosed in the Notes, the net exposures were as follows: at May 31,
2009, US$2,560,000; at May 31, 2008, US$1,268,000; at February 28, 2009,
US($404,000); at February 29, 2008, US$1,438,000. The above US dollars include
the equivalents for euros and pounds sterling which are not material.
    During the first quarter, the Company entered into foreign exchange
futures maturing this fiscal year which cover a portion of its USF
requirements. The Company uses the fair value accounting method for such
instruments. Under this method any unrealized gains or losses caused by
fluctuation to the market value are to be recorded in earnings for the period.
As these fluctuations on an interim basis represent a temporary gain or loss
and will not impact the financial results of the fiscal year, these gains or
losses have not been recorded in the interim financial statements.
    Interest expensed on bank indebtedness and the reducing term loan
amounted to $63,000 compared to $95,000 last year for a decrease of $32,000.
Total interest accrued and paid amounted to $63,000 compared to $95,000 last
year. Interest related to the long-term debt was $31,000 compared to $42,000
last year.
    The Earnings before income taxes for the period were $433,000 compared to
$140,000 last year, an increase of $293,000. Earnings from operating
activities were $172,000 ($56,000), an increase of $116,000. Earnings from
corporate were $261,000 compared to $84,000, an increase of $177,000.
    Income taxes for the period were $99,000 and $26,000 last year. Details
of the income tax components are presented in the Notes to the financial
statements.
    Net Earnings for the period were $334,000 ($114,000) or $0.13 ($0.05) per
share.
    As indicated in the MD&A for the first quarter last year, the declaration
of the quarterly dividend continues to be suspended in order to support
operating cash requirements. 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    May 31, Feb 28, Nov 30, Aug 31, May 31, Feb 29, Nov 30, Aug 31,
     most       2009    2009    2008    2008    2008    2008    2007    2007
     recent    (2010.  (2009.  (2009.  (2009.  (2009.  (2008.  (2008.  (2008.
     fiscal       Q1)     Q4)     Q3)     Q2)     Q1)     Q4)     Q3)     Q2)
     quarters ------- ------- ------- ------- ------- ------- ------- -------
    -------------------------------------------------------------------------
    (Expressed
     in
     thousands,
     except for
     amounts per
     share -
     unaudited)    $       $       $       $       $       $       $       $
    -------------------------------------------------------------------------
    Revenues  17,490  16,502  16,962  14,091  13,562  10,682  12,703  12,968
    -------------------------------------------------------------------------
    Net
     Earnings
     (loss)      334    (200)   (343)    287     114    (134)    214     121
    -------------------------------------------------------------------------
    Earnings
     (loss)
     per share  0.13   (0.08)  (0.14)   0.11    0.05   (0.05)   0.08    0.05
    -------------------------------------------------------------------------
    Dividends
     per share  0.00    0.00    0.00    0.00    0.00    0.00    0.00    0.00
    -------------------------------------------------------------------------


    Consolidated Cash Flows, Liquidity and Balance Sheets
    -----------------------------------------------------

    In investing activities, the Company added $103,000 of net property, plant
and equipment compared to $114,000 for this period last year.

    Available credit facilities

    The credit facilities available and reported at last year-end remain
substantially unchanged. The facilities are comprised of a revolving line of
credit for $6,750,000 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 the Canadian prime rate for
Canadian loans and U.S. base rates for U.S. loans 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. These
covenants are being respected and have been met.

    Receivables decreased by $343,000 compared to last fiscal year-end.
Account balances are substantially current, there are no anticipated serious
collection issues and any potential write-offs have been provided for in the
accounts.

    Inventories decreased by $1,332,000 (-12.2%) while overall volumes of rice
decreased by 19.5%. This is mainly due to lower anticipated sales to a major
processor which is currently involved in a labour dispute with its workforce.

    Marketable securities - see table below for financial summary and
investment mix.

    Property, plant and equipment decreased by $189,000 comprised of additions
of $103,000 and amortization of $292,000.

    Bank indebtedness was $5,217,000 compared to $4,596,000 at last year-end,
an increase of $621,000. This is mainly attributable to the decrease in
accounts payable which was partially offset by decreases in inventories and
receivables.

    Payables decreased by $2,514,000, due mainly to lower rice purchases.

    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, decreased by $4,000 after netting an
increase of $49,000 for the unrealized change in fair value of investments
held for trading at May 31, 2009.

    Shareholders' equity increased by $334,000 to $16,992,000 from $16,658,000
and represents $6.70 ($6.57) per share.

    Capital stock remained unchanged at $539,000 and represents 2,535,000
issued common shares.

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

                                                    www.TSX-Venture Exchange
                                                    ------------------------
    

    Critical Accounting Policies:
    -----------------------------

    The Company's critical accounting policies are those that it believes are
the most important in determining its financial condition and results. A
summary of the Company's significant accounting policies, including the
critical accounting policies, is set out in the notes to the consolidated
financial statements in the annual report for the year ended February 28,
2009. An extract of these policies is set out in the notes to the quarterly
consolidated financial statements.

    Future Accounting Changes:
    International Financial Reporting Standards (IFRS)

    In 2005, the Accounting Standards Board of Canada (AcSB) announced that
accounting standards in Canada are to converge with IFRS. In March 2009, the
CICA published an updated version of its "Implementation Plan for
Incorporating International Financial Reporting Standards from Canadian GAAP".
    This plan includes an outline of the key decisions that the CICA will
need to make as it implements the Strategic Plan for publicly accountable
enterprises that will converge Canadian generally accepted accounting
standards with IFRS. While IFRS uses a conceptual framework similar to
Canadian GAAP, there are significant differences in accounting policy which
must be addressed. The CICA has confirmed the changeover date from current
Canadian GAAP to IFRS for year ends beginning on or after January 1, 2011.
    The Company has formed a committee which is currently assessing the
future impact of these new standards on its consolidated financial statements.

    Discussion of Results:
    ----------------------

    In Dainty Foods, net sales increased by $3,576,000 (27.8%) for the period
compared to this quarter last year while overall rice sales volumes decreased
by 10.5% for the period. The volume reduction is primarily due to lower sales
of bagged rice compared to this quarter last year when panic buying erupted
due to concerns of a possible rice shortage. Costs and expenses increased by
$3,480,000 (27.2%) and earnings before income taxes increased by $96,000
compared to this quarter last year.
    The increase in sales and costs for the period were mainly attributable
to increased sales of flour compared to this quarter last year.
    Rumours of a world rice shortage were rampant and panic buying erupted
during April and May, 2008. Although rice prices have declined since reaching
record highs last year, they remain well above 2000-2007 levels and have not
declined as much as prices for most competing crops. Long grain accounts for
all of the price decline; medium grain prices remain at record levels.
    Selling price increases on our branded and private label items that were
introduced last year have contributed to improved margins.
    Although cost of sales increased in line with increased sales, and
operating, selling, and administrative expenses increased for the period,
earnings before income taxes increased by $96,000.
    While these increases are favourable, expectations for the next quarter
are uncertain due to recent challenges within our customer base.
    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 branded and private label items. New selling relationships have been
developed that are intended to add strength to our retail sales efforts.
    In Robert Reford, revenue increased by $143,000 (25.0%) for the period
compared to this quarter last year.
    Earnings before income taxes for the period increased by $20,000 compared
to this quarter last year.
    While these increases are favourable, expectations for the next quarter
remain uncertain due to developments in the global economy.
    As mentioned in the last MD&A, on July 1, 2008 this division entered into
a joint revenue sharing agreement with Norton Lilly International, Inc. to
handle vessel and port operations coast to coast in Canada as well as at U.S.
Great Lakes. This relationship continues to have a positive impact on revenue
this fiscal year.
    In Corporate Investments, portfolio income is summarized as follows:

    

                                    For the period         For the quarter
                                    --------------         ---------------
    -------------------------------------------------------------------------
                                    2010        2009        2010        2009
                                   -----        ----        ----        ----
    -------------------------------------------------------------------------
    Dividend and interest
     income                      $34,000     $25,000     $34,000     $25,000
    -------------------------------------------------------------------------
    Capital (losses)            -$49,000          $0    -$49,000          $0
    -------------------------------------------------------------------------
    Unrealized change in Fair
     Value                      $357,000    $108,000    $357,000    $108,000
                               ----------  ----------  ----------  ----------
    -------------------------------------------------------------------------
    Totals:                     $342,000    $133,000    $342,000    $133,000
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------
    -------------------------------------------------------------------------

    During the first quarter of this year, global financial markets have
somewhat improved and as indicated above, our portfolio recovered $357,0000
out of the $926,000 loss we had experienced last fiscal year. The portfolio
remains conservatively invested and no significant policy changes are
foreseen. Changes to percentages in the investment mix reflect changes in
market values and not in investment strategy. The Corporate Investments
continue to be held with a long term view.
    Effective June 1, 2009 the mandate for management of the portfolio has
been transferred to MacDougall Investment Counsel Inc. An "in-kind" transfer
of securities is in progress from TD Waterhouse, and we take this opportunity
to thank TD Waterhouse Private Investment Counsel for their stewardship over
the last few years.

    -------------------------------------------------------------------------
    Investment        May 31,     Feb 28,     Nov 30,     Aug 31,     May 31,
     Mix                2009        2009        2008        2008        2008
                    (2010.Q1)   (2009.Q4)   (2009.Q3)   (2009.Q2)   (2009.Q1)
                    ---------   ---------   ---------   ---------   ---------
    -------------------------------------------------------------------------
    Cash &
     Equivalents        18.9%       21.0%       15.6%        9.5%        5.0%
    -------------------------------------------------------------------------
    Bonds               18.9%       20.3%       20.5%       19.2%       23.1%
    -------------------------------------------------------------------------
    Preferred
     Shares             13.1%       13.1%       13.1%       14.2%       14.0%
    -------------------------------------------------------------------------
    Canadian
     Equities           31.1%       27.3%       30.8%       37.3%       38.7%
    -------------------------------------------------------------------------
    U.S. & Foreign
     Equities           18.0%       18.3%       20.0%       19.8%       19.2%
    -------------------------------------------------------------------------
    

    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's internal controls over
financial reporting during this quarter that have materially affected, or are
reasonably likely to materially affect, its internal control over financial
reporting.

    Outlook

    Time-Wise products will continue to grow in tonnage versus last year as
we realize the full year benefit of entry into the USA retail market and the
addition of an American processor in December, 2008. Notwithstanding, we are
not optimistic that Time-Wise sales will meet expectations as the market
continues to move to faster consumer preparation times.
    Rice flour sales are expected to remain strong and incremental sales
revenue is expected from the launches of new and innovative co-packed products
late in the next quarter.
    Expectations for the next quarter are uncertain due to recent challenges
within our customer base. A major bulk rice customer is currently involved in
a labour dispute with its workforce. A major flour customer has delayed
orders. The rapid depreciation of the U.S. Dollar as well as declining long
grain rice costs, diminishes our competitiveness against American suppliers in
the bagged rice market. Margins on our U.S. sales will decline in relation to
the devaluation of the U.S. Dollar.
    The ship agency results are expected to reflect a weakened economy
requiring fewer shipments to ports in the U.S. and Canadian great lakes.
    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, growth in FY2010 will be impacted by several factors
including (i) the demand for Time-Wise value added products (ii) the ability
of the company to secure rice at competitive prices (iii) the rate of
acceptance of new co-packed products (iv) the ability within the marketplace
to manage price increases to cover increased costs, and (v) general economic
conditions.

    Risks and Uncertainties

    Overview

    Management of risk includes properly identifying, communicating and
controlling the risks which may cause a serious impact to the business.
Management is confident that the Company employs effective procedures to
address all material risks.
    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

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

    In Recognition

    Now in our 128th year, we continue to strive to be as competitive and
innovative as possible. We thank our employees for their dedication and
commitment to the company. We also thank our loyal customers and suppliers for
their contribution to our success.
    We would also like to take this opportunity to thank Mr. Claude Moisan
who is stepping down as an Honorary Director this year. Mr. Moisan was elected
a Director in 1985, he chaired the Audit Committee for ten years and served as
Chairman of the Board from 1997 to 2001. Mr. Moisan contributed a great deal
during his 24 years of service to the Company, especially in his role as
Chairman, we are extremely grateful and wish him all the best.

    
    On behalf of the Board

    (signed)                             (signed)

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

    Dated at Montreal (Westmount), Quebec, June 18, 2009.


    MRRM Inc.
    CONSOLIDATED EARNINGS
    And COMPREHENSIVE INCOME

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (unaudited)                        For the                 For the
                                       -------                 -------
                                 THREE Months Ending        Quarter Ending
                                 -------------------        --------------

                                  May 31,     May 31,     May 31,     May 31,
                                  ------      ------      ------      ------
                                    2009        2008        2009        2008
                                    ----        ----        ----        ----
                                    '000        '000        '000        '000

    Revenues
      Sales                      $17,148     $13,429     $17,148     $13,429
      Increase in fair value
       of marketable securities
       held for trading              342         133         342         133
                               ----------  ----------  ----------  ----------

                                  17,490      13,562      17,490      13,562
                               ----------  ----------  ----------  ----------

    Costs and expenses
      Cost of sales, selling
       and administrative         16,714      13,080      16,714      13,080
      Amortization                   292         298         292         298
      Exchange gain                    0         (51)          0         (51)
      Interest on long-term
       debt                           31          42          31          42
      Other interest                  32          53          32          53
      Change in fair value of
       interest rate swap            (12)          0         (12)          0
                               ----------  ----------  ----------  ----------

                                  17,057      13,422      17,057      13,422
                               ----------  ----------  ----------  ----------

    Earnings before income
     taxes                           433         140         433         140
                               ----------  ----------  ----------  ----------

    Income taxes (recovery)
      Current                        103          43         103          43
      Future                          (4)        (17)         (4)        (17)
                               ----------  ----------  ----------  ----------

                                      99          26          99          26
                               ----------  ----------  ----------  ----------

    Net earnings and
     comprehensive income           $334        $114        $334        $114
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    Basic earnings per share       $0.13       $0.05       $0.13       $0.05
                                  ------       -----       -----       -----
                                  ------       -----       -----       -----

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


    MRRM Inc.
    CONSOLIDATED RETAINED EARNINGS

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (unaudited)                        For the                 For the
                                       -------                 -------
                                 THREE Months Ending        Quarter Ending
                                 -------------------        --------------

                                  May 31,     May 31,     May 31,     May 31,
                                  ------      ------      ------      ------
                                    2009        2008        2009        2008
                                    ----        ----        ----        ----
                                    '000        '000        '000        '000

    Balance, beginning of
     period                      $16,119     $16,261     $16,119     $16,261
    Net earnings                     334         114         334         114
                               ----------  ----------  ----------  ----------

                                  16,453      16,375      16,453      16,375

    Dividends                          0           0           0           0
                               ----------  ----------  ----------  ----------

    Balance, end of period       $16,453     $16,375     $16,453     $16,375
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

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


    MRRM Inc.
    CONSOLIDATED CASH FLOWS

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (unaudited)                        For the                 For the
                                       -------                 -------
                                 THREE Months Ending        Quarter Ending
                                 -------------------        --------------

                                  May 31,     May 31,     May 31,     May 31,
                                  ------      ------      ------      ------
                                    2009        2008        2009        2008
                                    ----        ----        ----        ----
                                    '000        '000        '000        '000

    OPERATING ACTIVITIES
    Net earnings                    $334        $114        $334        $114
    Defined benefit plan
     payments                        (16)        (16)        (16)        (16)
                                    -----       -----       -----       -----
                                     318          98         318          98
                                    -----       -----       -----       -----

    Non-cash items
      Change in fair value of
       marketable securities
       held for trading             (308)       (108)       (308)       (108)
      Change in fair value of
       interest rate swap            (12)          0         (12)          0
      Amortization                   292         298         292         298
      Pension benefit cost             6           7           6           7
      Future income taxes             (4)        (17)         (4)        (17)
                               ----------  ----------  ----------  ----------
                                     (26)        180         (26)        180
      Changes in non-cash
       working capital items        (635)        120        (635)        120
                               ----------  ----------  ----------  ----------
      Non-cash operating items
       generated (used)             (661)        300        (661)        300
                               ----------  ----------  ----------  ----------
    Cash flows from operating
     activities                     (343)        398        (343)        398
                               ----------  ----------  ----------  ----------

    INVESTING ACTIVITIES

    Marketable securities             (3)          0          (3)          0
    Disposals of marketable
     securities                        0         211           0         211
    Property, plant and
     equipment                      (103)       (114)       (103)       (114)
                               ----------  ----------  ----------  ----------

    Cash flows from investing
     activities                     (106)         97        (106)         97
                               ----------  ----------  ----------  ----------

    FINANCING ACTIVITIES
    Bank indebtedness                621        (333)        621        (333)
    Long-term debt                  (172)       (162)       (172)       (162)
                               ----------  ----------  ----------  ----------
    Cash flows from financing
     activities                      449        (495)        449        (495)
                               ----------  ----------  ----------  ----------

    Net change in cash and
     cash, end of period               0           0           0           0
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    Dividends per share            $0.00       $0.00       $0.00       $0.00
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

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


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

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (unaudited)                                          As at         As at
                                                        May 31,  February 28,
                                                        ------   -----------
                                                          2009          2009
                                                          ----          ----
                                                          '000          '000

    ASSETS
    Current
      Accounts receivable                               $6,482        $6,825
      Inventories                                        9,559        10,891
      Tax credits receivable                               104         1,106
      Prepaids                                             123           141
      Future income taxes                                   15            15
                                                   ------------  ------------
                                                        16,283        18,978

    Tax credits receivable, long-term                      921             0

    Marketable securities, at fair value                 4,032         3,720

    Property, plant and equipment, net                  15,031        15,220

    Cash surrender value of life insurance policy            5             5
                                                   ------------  ------------

                                                       $36,272       $37,923
                                                   ------------  ------------
                                                   ------------  ------------
    LIABILITIES
    Current
      Bank indebtedness                                 $5,217         4,596
      Accounts payable                                   9,112        11,626
      Income taxes payable                                 126            21
      Current portion of long-term liabilities             779           770
                                                   ------------  ------------

                                                        15,234        17,013
                                                   ------------  ------------

    Long-term debt, reducing term loan maturing
     in 2012                                             1,342         1,523

    Fair value of interest rate swap                       107           119

    Accrued benefit liability                              597           606

    Future income taxes                                  2,000         2,004
                                                   ------------  ------------

                                                        19,280        21,265
                                                   ------------  ------------
    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                                   16,453        16,119
                                                   ------------  ------------
                                                        16,992        16,658
                                                   ------------  ------------

                                                       $36,272       $37,923
                                                   ------------  ------------
                                                   ------------  ------------

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


    MRRM Inc.
    NOTES To CONSOLIDATED FINANCIAL STATEMENTS

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (unaudited)                                                 May 31, 2009


    1- Accounting Policies, Financial Risk management 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, 2009 except for new accounting policies that have been adopted effective
March 1, 2009. 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.

    Accounting changes

    Goodwill and Intangible Assets

    In February 2008, the CICA issued Section 3064, "Goodwill And Intangible
Assets", which supersedes Section 3062, "Goodwill and other intangible assets"
and Section 3450, "Research and Development Costs". The Section 3064 sets out
standards for recognition, measurement, presentation and disclosure of
goodwill and intangible assets. This accounting standard is effective for
fiscal years beginning on or after October 1, 2008. The Company has adopted
this Section as of March 1, 2009. The implementation of this new standard had
no impact on the Company's financial results and position.

    Credit risk and the fair value of financial assets and financial
    liabilities

    Emerging Issues Committee of the CICA Abstract No. 173 "Credit Risk and
the Fair Value of Financial Assets and Financial Liabilities" ("EIC-173")
clarifies that an entity's own credit risk and the credit risk of its
counterparty should be taken into account in determining the fair value of
financial assets and liabilities. The adoption of EIC-173 did not have a
material impact on the Company's financial statements or on the fair value
determination of its financial assets and liabilities, including derivative
financial instruments.

    Future accounting standards

    International Financial Reporting Standards (IFRS)

    In February 2008, Canada's Accounting Standards Board (AcSB) confirmed
that Canadian GAAP, as used by publicly accountable enterprises, will be
superseded by International Financial Reporting Standards (IFRS) for fiscal
years beginning on or after January 1, 2011. The Corporation will be required
to report under IFRS for its interim and annual financial statements for the
fiscal year ending February 29, 2012. The Corporation is currently preparing
its IFRS conversion plan. This plan will be aimed in particular at identifying
the differences between IFRS and the Canadian GAAP, assessing their impact and
analyzing the various policies that the Corporation will elect to adopt. Early
indication is that we will have no significant issues in adopting the new
standards within the required time frame.

    Also as at January 1, 2011, the Company will be required to adopt the CICA
handbook:

    Section 1582, "Business Combinations", which replaced CICA Section 1581 of
the same name. Section 1582 establishes principles and requirements of the
acquisition method for business combinations and related disclosures, and

    Section 1601, "Consolidated Financial Statements" and Section 1602,
"Non-Controlling Interests" together replace Section 1600, "Consolidated
Financial Statements". Section 1601 establishes standards for the preparation
of consolidated financial statements. Section 1602 establishes standards for
accounting for a non-controlling interest in a subsidiary in the consolidated
financial statements subsequent to a business combination. These Sections
constitute the GAAP equivalent to the corresponding IFRS. These Sections apply
to interim and annual consolidated financial statements relating to fiscal
years beginning on or after January 1, 2011 and the Corporation will adopt
these new Sections as of such date as part of its conversion to IFRS. Earlier
adoption is permitted as of the beginning of a fiscal year. The Corporation is
currently evaluating the impact of the adoption of these new Sections on the
consolidated financial statements.

    2- Financial Instruments and Financial Risk factors

    The Company's financial instruments recognized in the balance sheet
consist of bank indebtedness, marketable securities, accounts receivable,
accounts payable, the interest rate swap and long-term debt. The carrying
value of these balance sheet items approximates their fair market value. The
Company is exposed to a number of different financial risks arising from
normal course business exposure, as well as the Company's use of financial
instruments. These risk factors include credit risk, interest rate risk,
liquidity risk, currency risk, price risk and market risk.

    Derivative Financial Instruments

    The Company uses derivative financial instruments to manage its exchange
risk and interest rate risk. The Company does not use hedge accounting;
accordingly, the derivative financial instruments are recognized at their fair
value on the balance sheet and changes in fair value are recognized in
earnings for the year.

    Fair value

    Accounts receivable, bank indebtedness and accounts payable are financial
instruments whose fair values approximate their carrying values due to their
short-term maturity. 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 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. The swap had a negative fair value of $107,000 at
May 31, 2009 and has been recorded in long-term liabilities under fair value
of interest rate swap and recognized in Consolidated Earnings and
Comprehensive Income under other expenses. The fair value was determined based
on the prices obtained from the Company's lender for similar instruments.

    Currency risk

    The Company is exposed to foreign currency risks due to its imports of
bulk rice from the USA and overseas. These risks are partially offset by sales
in U.S. funds and by the purchase of forward exchange futures. During this
quarter, the Company has entered into foreign exchange contracts to purchase
an aggregate of USD$9.0 million beginning in May 2009 at fixed exchange rates
ranging from CAD $1.2293 to CAD$1.1508 to the U.S. Dollar. The forward foreign
exchange rate contracts will mitigate foreign exchange rate risk associated
with a portion of anticipated monthly inventory purchases. The Company uses
the fair value accounting method for such instruments. Under this method any
unrealized gains or losses caused by fluctuation to the market value are to be
recorded in income for the period. As these fluctuations on an interim basis
represent a temporary gain or loss and will not impact the financial results
of the fiscal year, these gains or losses have not been recorded on the
interim financial statements.
    As at May 31, 2009, assets denominated in U.S. dollars consisting of cash,
accounts receivable and marketable securities totalled US$5,312,972, assets
denominated in euros consisting of marketable securities totalled (euro)36,344
(US$4,331,721 and (euro)25,677 respectively as at February 28, 2009). Bank
indebtedness and accounts payable denominated in U.S. dollars totalled
US$2,753,336 (US$4,735,904 as at February 28, 2009).

    Credit risk

    Credit risk relates to the risk that a party to a financial instrument
will not fulfill some or all of its obligations, thereby, causing the Company
to sustain a financial loss. In the normal course of business, the Company is
exposed to credit risk from its customers, substantially all of which are in
the retail and processing markets. The Company performs ongoing credit
evaluations of new and existing customers' financial conditions and reviews
the collectibility of its trade and other accounts receivable in order to
mitigate any possible credit losses. The Company maintains an allowance for
doubtful accounts that represents its estimate of uncollectible amounts. The
components of this allowance include a provision related to specific losses
estimated on individually significant exposures.

    Interest rate risk

    Receivables and payables are non-interest bearing. Bank indebtedness bears
interest at the Canadian prime rate for Canadian loans and U.S. base rates for
U.S. loans and, optionally, the Company may take advantage of Bankers
Acceptances. The interest rate risk relating to the reducing term loan is as
described under Fair value above. For this quarter, a 0.5% hypothetical
increase in the prime rate on bank indebtedness would increase interest
expense by approximately $5,000. A 0.5% decrease in the prime rate would have
had a reverse effect. The Company's marketable securities bear interest at
fixed rates and the Company is, therefore, exposed to the risk of changes in
fair value resulting from interest rate fluctuations.

    Liquidity risk

    The Company believes that future cash flows from operations and
availability under existing credit facilities from banking institutions will
be sufficient to meet its obligations. Under senior management's supervision,
the Company manages its liquidity according to financial forecast and expected
cash flows.

    Price risk

    The Company's price risk arises from changes in raw material prices, which
are significantly influenced by the fluctuating underlying markets. The
Company's objectives in managing its price risk are three fold: i) to protect
its financial results for the period from significant fluctuations in raw
material costs, ii) to anticipate, to the extent possible, and plan for
significant changes in the raw material markets and iii) to ensure sufficient
availability of raw materials required to meet the Company's manufacturing
requirements. To manage its exposure to price risks, the Company closely
monitors current and anticipated changes in market prices and develops
pre-buying strategies and patterns, and seeks to adjust its selling prices
when market conditions permit. Historical results indicate management's
ability to rapidly identify fluctuations in raw material prices and, to the
extent possible, incorporate such fluctuations in the Company's selling
prices.

    Market risk

    The Company is exposed to fluctuations in the market prices of its
marketable securities that are classified as held-for-trading. Changes in the
fair value of marketable securities are recorded in consolidated earnings. The
risk is managed by ensuring a relatively conservative asset allocation of
bonds and equities. For this quarter, the effect before taxes represents an
increase in income of $357,000 compared to $108,000 for the same period last
year.

                                       For the                 For the
                                       -------                 -------
                                 THREE Months Ending        Quarter Ending
                                 -------------------        --------------


                                  May 31,     May 31,     May 31,     May 31,
                                  ------      ------      ------      ------
                                    2009        2008        2009        2008
                                    ----        ----        ----        ----

                                    '000        '000        '000        '000

    3- Information included in
       the Statement Of Earnings

       Income taxes
        paid (received)               $2        ($19)         $2        ($19)
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

       Interest on long-term
        debt                         $31         $42         $31         $42
       Interest on bank
        indebtedness and other       $32         $53         $32         $53
                                   ------      ------      ------      ------
       Interest paid and
        expensed                     $63         $95         $63         $95
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

    4- Income Taxes

       Tax at combined basic
        federal and provincial
        income tax rate             $135         $46        $135         $46
       Non-taxable portion of
        capital losses                 8           0           8           0
       Tax-free income                (7)         (9)         (7)         (9)
       (Increase) in fair
        value of investments         (55)        (17)        (55)        (17)
       Non-deductible expenses         7           7           7           7
       Other                          11          (1)         11          (1)
                                   ------      ------      ------      ------
                                     $99         $26         $99         $26
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

       Effective tax rate           22.8%       18.3%       22.8%       18.3%
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

       The Company's future
        income tax liabilities
        (assets) are as follows:
       Employee future benefits    ($212)      ($193)      ($212)      ($193)
       Research and development
        tax credits                  280         244         280         244
       Property, plant and
        equipment                  2,002       1,820       2,002       1,820
       Loss carry forwards           (47)        (84)        (47)        (84)
       Other                         (38)        (35)        (38)        (35)
                               ----------  ----------  ----------  ----------
                                  $1,985      $1,752      $1,985      $1,752
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

       Comprising
       Current                      ($15)       ($15)       ($15)       ($15)
       Non-current                 2,000       1,767       2,000       1,767
                               ----------  ----------  ----------  ----------
                                  $1,985      $1,752      $1,985      $1,752
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    5- Supplemental Cash
       Flow Information:

         Changes in non-cash
          working capital
          items

           Accounts receivable      $343       ($859)       $343       ($859)
           Inventories             1,332         716       1,332         716
           Tax credits
            receivable                81           0          81           0
           Prepaids                   18          47          18          47
           Accounts payable       (2,514)        192      (2,514)        192
           Income taxes
            payable                  105          24         105          24
                               ----------  ----------  ----------  ----------

                                   ($635)       $120       ($635)       $120
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    6- Segmented Information

         Revenue

           Food processing
            and selling          $16,434     $12,858     $16,434     $12,858
           Ship agency
            services                 714         571         714         571
                                   ------      ------      ------      ------
           Operating              17,148      13,429      17,148      13,429
           Corporate                 342         133         342         133
                                   ------      ------      ------      ------
                                 $17,490     $13,562     $17,490     $13,562
                                 --------    --------    --------    --------
                                 --------    --------    --------    --------

         Earnings

           Food processing and
            selling                 $180         $84        $180         $84
           Ship agency services       (8)        (28)         (8)        (28)
                                   ------      ------      ------      ------
           Operating                 172          56         172          56
           Corporate                 261          84         261          84
                                   ------      ------      ------      ------
         Earnings before income
          taxes                      433         140         433         140
         Income Taxes                 99          26          99          26
                                   ------      ------      ------      ------

         Net Earnings               $334        $114        $334        $114
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

         Assets

           Food processing and
            selling              $31,157     $28,022     $31,157     $28,022
           Ship agency services    1,087         464       1,087         464
                                   ------      ------      ------      ------
           Operating              32,244      28,486      32,244      28,486
           Corporate               4,028       4,772       4,028       4,772
                                   ------      ------      ------      ------
                                 $36,272     $33,258     $36,272     $33,258
                                 --------    --------    --------    --------
                                 --------    --------    --------    --------

         Capital expenditures

           Food processing and
            selling                  $92        $114         $92        $114
           Ship agency services       11           0          11           0
                                   ------      ------      ------      ------
           Operating                 103         114         103         114
           Corporate                   0           0           0           0
                                   ------      ------      ------      ------
                                    $103        $114        $103        $114
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------

         Amortization

           Food processing and
            selling                 $284        $285        $284        $285
           Ship agency services        8          13           8          13
                                   ------      ------      ------      ------
                                    $292        $298        $292        $298
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------


    7- Capital disclosures

     The Company defines its capital as long-term debt (including the current
portion), shareholders' equity, minus cash and cash equivalents. Capital is
calculated as follows:

           Short-term and
            current portion of
            long-term debt        $5,925      $3,632      $5,925      $3,632
           Long-term debt          1,449       2,050       1,449       2,050
           Shareholders' equity   16,992      16,914      16,992      16,914
                                  -------     -------     -------     -------
                                 $24,366     $22,596     $24,366     $22,596
                                 --------    --------    --------    --------
                                 --------    --------    --------    --------

    The Company's objectives for managing its capital structure are to ensure
financial capacity, liquidity and flexibility to maintain a strong capital
base to sustain ongoing development and operations.
    The Company's credit facilities are subject to a number of covenants and
these have been met as indicated under "Liquidity risk". These covenants are
as follows: i) A revolving line of credit secured by accounts receivable and
marketable securities; and ii) Maintain a Debt Service Coverage ratio of not
less than 1.25 on a pre-dividend basis and 1.00 on a post-dividend basis.
    The primary source of capital is shareholders' equity. The credit
facilities available and reported at last year-end remain substantially
unchanged. The facilities are comprised of a revolving line of credit for
$6,750,000 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 the Canadian prime rate for Canadian loans and
U.S. base rates for U.S. loans 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. The
Corporation is not subject to any external capital restrictions and has no
commitments to sell common shares.

    8- Geographic Information

         External customer
          revenues(1)

           Canada                $13,803     $11,969     $13,803     $11,969
           U.S.A.                  3,687       1,593       3,687       1,593
                                   ------      ------      ------      ------
                                 $17,490     $13,562     $17,490     $13,562
                                 --------    --------    --------    --------
                                 --------    --------    --------    --------

    (1) Revenues from external customers, attributed to countries based on
        the location where goods or services where provided.

        All of the Company' s assets are located in Canada.
    




For further information:

For further information: Lou Younan, Vice-President Finance & CFO, MRRM 
Inc., (514) 908-7777, Fax: (514) 906-0220, mr@mrrm.ca

Organization Profile

MRRM Inc.

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