SYS-CON MEDIA Authors: Pat Romanski, Adrian Bridgwater, Yeshim Deniz, Elizabeth White, Sean Houghton

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Ridley Inc. Reports Financial Results for Fiscal 2014 Third Quarter

MANKATO, MINNESOTA -- (Marketwired) -- 05/08/14 -- Ridley Inc. (TSX:RCL) today reported its financial results for the three and nine months ended March 31, 2014. All currency amounts are stated in U.S. dollars unless otherwise noted.

For the three months ended March 31, 2014, Ridley's earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations were $12.5 million compared to $10.5 million last year. Consolidated net income (after income taxes) for the quarter was $8.0 million ($0.62 per share) compared to $5.4 million ($0.42 per share) last year.

Ridley also reported today that it has declared a special cash dividend on its common stock of CAD $2.00 per share payable on May 30, 2014 to shareholders of record on May 20, 2014. The special dividend of approximately CAD $25.6 million is not indicative of any intention at the present time to initiate a regular dividend payment to shareholders.

Ridley's results in the third quarter of fiscal 2014 reflect increased tonnage volume, improved average unit margins from a favorably trending product mix and reduced overhead expenses on lower discretionary spending. Favourable weather conditions and good producer economics contributed to the 5.5% increase in tonnage volume in the third quarter despite lower volume in the beef sector relative to last year. Product mix trended towards higher value-added products, including feed supplement blocks, while unit margins benefited from more favorable raw material positions relative to last year. Despite higher manufacturing expenses relative to last year, Ridley generated a 5.6% increase in gross profits from continuing operations in the third quarter this year.

Operating income of continuing operations (before income taxes) increased by 21.7% in the third quarter of fiscal 2014 to $10.7 million. U.S. Feed Operations (USFO) reported a $0.4 million increase in operating income for the period on volume growth in the dairy and swine sectors and generally improved unit margins. Ridley Block Operations (RBO) reported a $1.1 million increase in operating income over last year, mainly from favourable market conditions including extended winter conditions this quarter. Ridley Feed Ingredients (RFI) reported operating income of $1.2 million in the third quarter of fiscal 2014, a $0.5 million increase over last year resulting from volume growth and improved unit margins.

In the second quarter last year, Ridley merged its Canadian Feed Operations with Masterfeeds Inc. to form Masterfeeds LP, the second largest feed provider in Canada. Ridley's share of the operating income of its interest in Masterfeeds LP improved to $0.4 million in the third quarter this year from $0.3 million last year.

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis dated as at May 8, 2014 and the accompanying interim consolidated financial statements for the three and nine months ended March 31, 2014 have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") which incorporate International Financial Reporting Standards ("IFRS").

THIRD QUARTER RESULTS

The following summary is presented to assist in understanding the third quarter results of fiscal 2014.


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Summary of Results of Operations   Three Months Ended    Nine Months Ended 
                                         March 31             March 31     
($000s except for EPS)                 2014       2013       2014      2013
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Continuing Operations (i)                                                  
Revenue                             147,581    144,571    434,037   444,697
Gross profit                         23,445     22,198     65,085    63,117
Operating income                     10,651      8,751     27,095    25,801
Net income before exceptions          7,972      5,539     18,228    16,363
Exceptions, net of income taxes                                            
 (ii)                                    (4)         -         98         -
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Net income from continuing                                                 
 operations                           7,968      5,539     18,326    16,363
Earnings per share (EPS), from                                             
 continuing operations                 0.62       0.43       1.43      1.28
EBITDA (iii)                         12,545     10,522     32,380    31,313
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Net income from discontinued                                               
 operations                               -       (126)         -       493
Net income for the period             7,968      5,413     18,326    16,856
Earnings per share (EPS), basic                                            
 and diluted                           0.62       0.42       1.43      1.32
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i.  Continuing Operations excludes the results of the Company's feed
    manufacturing operations in Canada previously reported as the Canadian
    Feed Operations (CFO) segment and now comprising discontinued
    operations. 
ii. Exceptions - In the preceding summary data, net income was reported
    before exceptions. Those exceptions in the nine months ended March 31,
    2014 were comprised of $0.3 million (net of income taxes) from the gain
    on the sale of a previously closed facility in Castleton, Indiana, and
    $0.2 million (net of income taxes) for the asset impairment loss and
    restructuring accrued for closure of the Chambersburg, Pennsylvania
    facility. There were no exceptions in the first nine months of last
    year. 
iii.EBITDA - Operating income before depreciation, amortization and
    exceptions. EBITDA does not have a standardized meaning prescribed by
    GAAP and, therefore, is not readily comparable to similar measures
    presented by other companies. However, management believes that this
    measure provides investors with useful supplemental information.

Consolidated Third Quarter Results

Revenue from continuing operations was $147.6 million in the third quarter of fiscal 2014, a 2.1% increase over the same period last year. A comparison of revenue is not necessarily indicative of the strength of Ridley's business because revenue is influenced by fluctuating commodity prices.

Overall sales volume, as measured in tons of feed products sold, was 5.5% higher in the third quarter this year reflecting favourable market conditions, including extended winter conditions this quarter and good producer economics. While tonnage volumes were lower in the beef cattle sector from the easing of drought conditions that boosted demand for feed supplementation last year, volumes were higher in other animal species less affected by forage availability, including dairy cattle, swine, poultry and equine.

Consolidated gross profit from continuing operations in the third quarter of fiscal 2014 was $23.4 million compared to $22.2 million in the same period last year. The major part of the 5.6% increase in gross profits in the third quarter was the result of the increase in overall tonnage volumes combined with higher unit margins that reflected a favourable product mix in most market segments and improved raw material positions. Direct production costs and manufacturing overheads, which are included in gross profits, increased by 9.2% in the third quarter over last year. Utilities, labor, repairs and maintenance expense, as well as higher volumes, accounted for most of the increase in manufacturing costs in the quarter.

Operating expenses, which include technical services, selling, administration and research and development, in continuing operations were $12.8 million in the third quarter compared to $13.4 million last year. Discretionary spending, which includes professional fees, advertising, promotion and travel and other administrative expenses, was generally lower in the quarter from last year.

EBITDA is comprised of operating income of continuing operations before depreciation, amortization and exceptions. For the three months ended March 31, 2014, EBITDA was $12.5 million compared to $10.5 million for the same period last year. The increase of $2.0 million in EBITDA is mainly comprised of the $1.2 million increase in gross profit and the $0.7 million decrease in net overhead expenses.

Net income from continuing operations, net of income tax expense, for the third quarter of fiscal 2014 was $8.0 million ($0.62 per share) compared to $5.5 million ($0.43 per share) in the same period of fiscal 2013.

Discontinued operations are comprised of the Company's feed manufacturing business in Canada, previously reported as the Canadian Feed Operations (CFO) segment, which was merged into a limited partnership with Masterfeeds Inc. in the second quarter of fiscal 2013. Prior period results of CFO have been re-presented here as discontinued operations. Net income from discontinued operations in the third quarter of fiscal 2014 was nil compared to a net loss of $0.1 million last year.

The Company owns a non-controlling interest in the limited partnership, Masterfeeds LP. Starting with the second quarter of fiscal 2013, the Company's share of the earnings of Masterfeeds LP is reported as share of net income of associate, which in the third quarter of fiscal 2014 was $0.4 million compared to $0.3 million for the same period last year.

Including income from discontinued operations, the Company reported net income after taxes for the three months ended March 31, 2014 of $8.0 million ($0.62 per share) compared to $5.4 million ($0.42 per share) in the same period last year.

Consolidated Nine Months Results

For the nine months ended March 31, 2014, revenue of $434.0 million from continuing operations decreased $10.7 million, or 2.4%, from the same period last year reflecting lower raw material prices this year, partly offset by a 1.2% increase in overall tonnage volumes for the period.

Consolidated gross profit from continuing operations for the nine months ended March 31, 2014 was $65.1 million compared to $63.1 million last year, the result of higher average unit margins and increased sales volumes. Margins were improved by favourable product mix in most market segments and lower unit costs of raw materials. Direct production costs and manufacturing overheads, which are included in gross profits, increased by 6.0% in the nine months of fiscal 2014.

Operating expenses of continuing operations in the nine months ended March 31, 2014 were $38.0 million, a $0.7 million increase over last year. Earnings exceptions, which are also included in operating expenses, were related to the closure and sale of two facilities earlier in the year.

EBITDA from continuing operations in the first nine months of fiscal 2014 was $32.4 million compared to $31.3 million for the same period last year. The increase of $1.1 million in EBITDA is comprised of the $2.0 million increase in gross profit and a $0.1 million increase in depreciation and amortization expense offset by a $0.8 million increase in net overhead expenses.

Net income from continuing operations for the nine months ended March 31, 2014 was $18.3 million (earnings per share of $1.43) compared to $16.4 million (earnings per share of $1.28) in the same period last year. Net income from discontinued operations was nil this year compared to $0.5 million last year. Including income from discontinued operations and share of income of associate, the Company reported net income after taxes of $18.3 million (earnings per share of $1.43) for the first nine months of fiscal 2014 compared to $16.9 million (earnings per share of $1.32) in the same period last year.

The accompanying interim financial statements reflect the Company's adoption of IAS 19r "Employee Benefits" which significantly changed the recognition and measurement of defined benefit pension and post-retirement expense, and the disclosure of all employee benefits. Implementation of this standard in the Company's interim consolidated financial statements required restatement of the fiscal 2013 comparative numbers. In summary, the effects of IAS 19r on previously reported financial statements for the nine months ended March 31, 2013 were: (1) reclassification of $1.5 million from retained earnings to accumulated other comprehensive income, and (2) a reduction of net income by $0.6 million ($0.04 per share). The accompanying notes to the financial statements more fully explain the reporting changes caused by IAS19r and the retrospective effect on the Company's previously reported results for fiscal 2013.

The following table is a reconciliation of EBITDA to net income, the most closely comparable GAAP measure to EBITDA:


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EBITDA                           Three Months Ended     Nine Months Ended  
                                       March 31              March 31      
($000s)                              2014       2013       2014       2013 
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Net income for the period           7,968      5,413     18,326     16,856 
Net (income) loss from                                                     
 discontinued operations                -        126          -       (493)
Income tax expense                  2,870      3,396      8,820      9,551 
Share of net income of                                                     
 associate                           (396)      (280)      (732)      (461)
Finance expense                       234        359        766      1,142 
Finance income                        (25)      (263)       (85)      (794)
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Operating income                   10,651      8,751     27,095     25,801 
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Depreciation of property, plant                                            
 and equipment                      1,585      1,497      4,677      4,848 
Amortization of intangible                                                 
 assets                               303        274        770        664 
Gain on sale of facilities              -          -       (420)         - 
Asset impairment loss                   -          -        203          - 
Restructuring                           6          -         55          - 
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EBITDA of continuing operations    12,545     10,522     32,380     31,313 
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Ridley reports its financial results according to IFRS that have been incorporated into the Handbook of the Canadian Institute of Chartered Accountants ("CICA"). However, Ridley has included in its management discussion and analysis certain non-IFRS financial measures and ratios that its management believes provide useful information in measuring the financial performance and financial condition of Ridley. These measures and ratios do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other public companies, nor should they be construed as an alternative to other financial measures described by IFRS.

Operating income is defined as net income before finance expense, finance income, income tax expense, share of net income or loss of associate and net income or loss from discontinued operations. Earnings before interest, taxes, depreciation and amortization ("EBITDA") is defined as operating income of continuing operations before depreciation and amortization, gain or loss on sale of facilities, restructuring and asset impairment loss.

Comprehensive Income

Comprehensive income (loss) is the change in net assets that results from transactions, events and circumstances from sources other than investments by and/or distributions to shareholders. Other comprehensive income (OCI) is comprised of unrealized gains and losses on translation of financial statements of related entities with foreign functional currency to U.S. dollar reporting currency, the transition adjustment between retained earnings and accumulated other comprehensive income related to the adoption of IAS19r and the accumulated currency translation losses realized upon disposal of the Canadian business unit. Comprehensive income in the third quarter of fiscal 2014 was $7.1 million, which was comprised of net income of $8.0 million, as reported above, less unrealized losses of $0.9 million on the translation of the financial statements of related entities with foreign functional currency to U.S. dollar reporting currency. Comprehensive income for the nine months ended March 31, 2014 was $17.1 million, which was comprised of net income of $18.3 million, as reported above, less unrealized losses of $1.2 million on the translation of the financial statements of related entities with foreign functional currency to U.S. dollar reporting currency.

SEGMENT RESULTS

In the second quarter of fiscal 2013, the Company modified its reporting segments to eliminate the Canadian Feed Operations (CFO) segment following the sale of substantially all of the net assets of its Canadian operations to Masterfeeds LP. The following is a summary of operating income (loss) of the reporting segments of the Company's continuing operations for the third quarter and nine months year-to-date of fiscal 2013 and 2014. "Corporate" in this presentation includes the consolidating elimination of intersegment sales and the total assets and property, plant and equipment associated with discontinued operations.


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Operating Income (Loss)          Three Months Ended     Nine Months Ended  
                                       March 31              March 31      
($000s)                              2014       2013       2014       2013 
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U.S. Feed Operations (USFO)         3,736      3,347     10,108      9,947 
Ridley Feed Ingredients (RFI)       1,172        695      2,631      1,756 
Ridley Block Operations (RBO)       6,668      5,574     16,837     16,369 
Corporate                            (925)      (865)    (2,481)    (2,271)
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Consolidated operating income                                              
 from continuing operations        10,651      8,751     27,095     25,801 
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U.S. Feed Operations (USFO)

The USFO segment consists of twenty full-line production facilities, operating in the United States as Hubbard Feeds. USFO plants derive most of their business by manufacturing and marketing a broad range of complete feeds, supplements and premixes to meat, milk and egg producers, and owners of equine and companion animals located mostly in the Midwestern United States.

Tonnage volume increased by 2.0% in the third quarter of fiscal 2014 compared to last year. Beef feed volume last year reflected a significant increase in demand for feed supplements due to the severe drought throughout much of the United States. With the return to a more normal level of demand in the beef sector, volumes for beef feed supplements have trended lower than last year. However, USFO's total volumes in the third quarter were higher relative to last year due to strong sales in the dairy and swine sectors. Year-to-date volumes were 1.8% lower than last year on reduced demand for beef feed supplements relative to the prior year when demand was stimulated by the severe drought.

Gross profits in the third quarter this year were $11.7 million compared to $11.5 million in the same period last year. Increased volumes in the dairy sector combined with improved unit margins in dairy and lifestyle products more than offset the reduced contribution to gross profits from the beef sector. For the year-to-date, improved unit margins in beef feed supplements and increased volume of higher value-added dairy feed products contributed to an increase of $0.6 million in gross profits from last year.

Operating expenses decreased by $0.3 million in the third quarter this year, mainly the result of reduced discretionary spending and workers' compensation claims. Year-to-date operating expenses increased by $0.4 million, mainly in administrative costs. Operating expenses this year-to-date included a $0.4 million gain on the sale of the site of the Castleton, Indiana feed manufacturing facility and $0.3 million for the asset impairment loss and restructuring expenses related to the Chambersburg, Pennsylvania facility, which discontinued feed manufacturing operations in the second quarter this year.

Operating income for the third quarter of fiscal 2014 was $3.7 million, a $0.4 million increase over last year. Year-to-date operating income was $10.1 million compared to $9.9 million for the same period last year.

In the second quarter of fiscal 2014, the Company ceased feed manufacturing operations at its Chambersburg, Pennsylvania facility. Customer volumes previously served by Chambersburg have been consolidated with the Company's equine-dedicated feed facility in Versailles, Kentucky.

Ridley Feed Ingredients (RFI)

The RFI segment produces and distributes vitamin and trace mineral premixes, small packaged specialty products, medicated and non-medicated feed additives and micro feed ingredients to customers throughout North America from its facility in Mendota, Illinois.

Revenue in the third quarter of fiscal 2014, including intersegment sales, increased by $3.0 million or 10.7% over the same period last year as a result of broadly based growth in volumes across most product categories and animal species. Year-to-date revenues increased by 4.8%. Revenues earlier in the year declined from lower volumes of redistributed feed ingredients, particularly feed-grade vitamins and amino acids.

Gross profit of $2.3 million in the third quarter increased $0.5 million over last year, mainly the result of increased volumes and improved unit margins. Gross profit of $6.0 million for the nine months year-to-date increased $1.3 million from last year.

Operating expenses in the third quarter were not materially changed from the prior year while expenses for the nine months year-to-date increased by $0.4 million on generally higher selling and administrative costs.

Operating income for the third quarter was $1.2 million, a $0.5 million increase over last year reflecting the increase in gross profit for the period. Year-to-date operating income was $2.6 million compared to $1.8 million last year.

Ridley Block Operations (RBO)

The RBO segment manufactures a complete range of block supplements, including low moisture, pressed, compressed, composite and poured blocks, loose minerals and dried molasses from eight U.S. facilities.

RBO's tonnage volume in the third quarter of fiscal 2014 increased by 5.2% over last year, mainly from favourable market conditions, including extended winter conditions this quarter, and favourable producer economics. Year-to-date volumes were 1.8% lower than last year following a return to more normal conditions from the severe drought last year. Volume last year was positively influenced by drought conditions that increased demand for feed supplementation. With the easing of drought conditions this year, volumes returned to historically more normal levels, partly offset by the contribution to volume from the acquisition of Stockade Brands in November 2012.

Gross profits of $9.5 million in the third quarter this year increased by $0.6 million or 6.7% over last year reflecting increased overall sales volumes and improved unit margins due to a favourable product mix. For the nine months year-to-date, gross profits increased by $0.1 million from last year reflecting reduced volumes in the first half this year relative to last year and increased manufacturing costs.

Operating expenses in the third quarter of fiscal 2014 decreased by $0.5 million from last year and by $0.4 million for the year-to-date, mainly the result of reduced discretionary spending.

Operating income increased over last year by $1.1 million in the third quarter in line with the increase in gross profits and reduced operating expenses. Operating income for the nine months year-to-date increased by $0.5 million from last year. The improvement in income in the third quarter was partly offset by the lower volumes and gross profits of the first half of this year relative to the strong performance from drought-driven demand last year.

LIQUIDITY, CAPITAL RESOURCES, AND CASH FLOW

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


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Balances as of:           March   December  September       June      March
($000s)                 31 2014    31 2013    30 2013    30 2013    31 2013
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Net working capital                                                        
 (i)                    35,668     35,493     38,109     34,816     35,705 
Net debt (cash                                                             
 surplus) (ii)          (4,051)     5,152     14,607     15,931         85 
Equity                 138,073    131,004    124,516    120,924    138,905 
Debt to                                                                    
 capitalization                                                            
 ratio (iii)                 -%       3.5%      11.0%       9.0%       0.3%
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i.  Net working capital is defined as current assets (excluding cash and the
    current portion of loans receivable) less current liabilities (excluding
    outstanding cheques in excess of bank balances, short-term debt, and the
    current portion of long-term debt). 
ii. Net debt (cash surplus) is defined as bank obligations and outstanding
    cheques in excess of bank balances less cash and short-term deposits. 
iii.Capitalization is debt plus equity.

Net working capital balances increased by $0.2 million in the three months between December 31, 2013 and March 31, 2014. Accounts receivable were lower by $4.1 million from the prior quarter on higher turnover rates while inventories increased $3.9 million due to timing of raw materials purchases. Compared to the same point in time a year ago, net working capital balances were not materially changed; a $1.4 million reduction in accounts receivable and $3.6 million increase in trade payables were largely offset by a $4.7 million reduction in income taxes payable.

The following table is a summary of cash generated or utilized by business operations, net of capital expenditures on plant and equipment and other intangibles, excluding business acquisitions.


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Summary of Changes in Cash       Three Months Ended     Nine Months Ended  
Available ($000s)                      March 31              March 31      
                                                                           
                                     2014       2013       2014       2013 
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Cash flow from operating                                                   
 activities                         9,405      6,528     22,368     18,600 
Net change in non-cash working                                             
 capital balances                     762     (1,663)     1,909     (1,517)
(Increase) decrease in loans                                               
 receivable, net                      200        747       (134)       341 
Proceeds on disposal of                                                    
 property, plant and equipment         29         26        789         35 
Capital expenditures, including                                            
 purchase of intangible assets     (1,162)    (1,602)    (4,901)    (8,196)
Proceeds on disposal of                                                    
 discontinued operations                -          -          -      2,076 
Distributions from associate            -          -          -      7,944 
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Increase in cash available          9,234      4,036     20,031     19,283 
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For the third quarter of fiscal 2014, cash available from operations net of capital expenditures and disposals (excluding business acquisitions) increased by $9.2 million compared to a $4.0 million increase in the same three-month period last year. For the nine months year to-date, cash available increased by $20.0 million compared to $19.3 million last year. Cash flows for the year to-date last year included distributions from associate of $7.9 million following the transfer of working capital assets of Canadian operations to Masterfeeds LP and $2.1 million for the excess of working capital contributed to the start-up of Masterfeeds LP.

Subsequent to the end of the third quarter, the Company declared a special dividend of CAD $2.00 per common share to shareholders of record on May 20, 2014 payable on May 30, 2014. The special dividend of approximately CAD $25.6 million is not indicative of any intention at the present time to initiate a regular dividend payment to shareholders. The Company intends to designate 100% of the special dividend as "eligible dividends" for purposes of the Income Tax Act (Canada).

The Company's borrowing capacity under its loan agreement with U.S. Bank National Association was unchanged at $50.0 million as at March 31, 2014.

Capital Expenditures

Capital expenditures on property, plant and equipment, and intangible assets (software) in the third quarter of fiscal 2014 were $1.2 million, compared to $1.6 million in the same period a year ago. Capital expenditures for the year-to-date were $4.9 million compared to $8.2 million last year. Lower capital expenditures this year were mainly due to the discontinuation of Canadian Feed Operations.

Business acquisitions of $5.7 million last year reflect the net purchase price for the assets of Stockade Brands Inc.

Investment in Masterfeeds LP

On November 30, 2012 the Company and Masterfeeds Inc., a wholly-owned subsidiary of Ag Processing Inc., completed the merger of their respective livestock and poultry feed and nutrition businesses in Canada into a new limited partnership called Masterfeeds LP. Masterfeeds Inc. and Ridley Inc. contributed essentially all of their respective Canadian feed operating assets and liabilities in exchange for relative unit holdings in Masterfeeds LP. Ridley retains a non-controlling equity interest in Masterfeeds LP.

Starting in the second quarter of fiscal 2013, results of the Company's Canadian operations through November 30, 2012 are reported as net income from discontinued operations. Pre-tax earnings from the Company's investment in Masterfeeds LP are reported as share of net income of associate under the equity method of accounting, which in the third quarter of fiscal 2014 was $0.4 million. As a limited partnership, Masterfeeds LP is not subject to income taxes - any taxable income is allocated between the respective partners. The Company's investment in Masterfeeds LP is reported as an investment in associate, which was $17.1 million as at March 31, 2014.

On December 18, 2013 a fire at the Humboldt, Saskatchewan feed plant owned and operated by Masterfeeds LP caused significant damage to the building structure and manufacturing equipment forcing the facility to close while repairs are made. The cost of repairs and business interruption expense are expected to be substantially covered by insurance.

Outstanding Share Data

The Company's share capital consists of an unlimited number of common shares, with no par value. On December 12, 2013, the Company received approval from the Toronto Stock Exchange (the "TSX") to initiate a normal course issuer bid for the Company's shares through the facilities of the TSX. The shares repurchase program permits the Company to purchase for cancellation up to 639,499 of its common shares over the twelve-month period ending December 15, 2014. As at May 8, 2014, the Company had not repurchased any shares under the current normal course issuer bid. The number of shares outstanding as at March 31, 2014 and as at May 8, 2014 was 12,789,978.

SEASONALITY AND COMMODITY VARIABILITY

The Company experiences seasonal variations in revenue. Historically, revenue is strongest in the second and third fiscal quarters when colder weather from October to March typically increases demand for beef cattle feed. Other product lines are only marginally affected by seasonal conditions. Certain of the raw materials comprising the Company's products incorporate commodity-based products and the by-products of commodity processing. Fluctuating commodity prices may therefore influence revenues and associated cost of sales as the Company's selling prices are adjusted to reflect current raw materials markets.

SELECTED QUARTERLY FINANCIAL INFORMATION


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($000s except per share      Fiscal     First    Second     Third    Fourth
data)                          Year   Quarter   Quarter   Quarter   Quarter
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Revenue (i)                    2014   133,921   152,535   147,581          
                                                                           
                                                                           
                                                                           
                               2013   143,061   157,065   144,571   130,053
                               2012   126,954   146,258   136,528   118,260
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Net income before              2014     2,853     7,304     7,972          
 discontinued operations                                                   
 and exceptions (ii) net                                                   
 of income taxes                                                           
                                                                           
                               2013     5,135     5,689     5,539     1,561
                               2012     1,817     3,812     5,744       479
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Net income per share           2014      0.22      0.57      0.62          
 (EPS) before                                                              
 discontinued operations                                                   
 and exceptions (ii) net                                                   
 of income taxes                                                           
                                                                           
                               2013      0.40      0.45      0.43      0.12
                               2012      0.14      0.30      0.45      0.04
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Net income (iii)               2014     3,070     7,288     7,968          
                                                                           
                                                                           
                                                                           
                               2013     5,073     6,370     5,413     1,647
                               2012       722     3,950     3,952       328
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Net income per share           2014      0.24      0.57      0.62          
 (EPS)                                                                     
                                                                           
                                                                           
                                                                           
                               2013      0.40      0.50      0.42      0.12
                               2012      0.06      0.31      0.30      0.03
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i.  Revenue in the current and prior quarters has been restated to exclude
    discontinued operations. 
ii. Exceptions include asset impairment loss, restructuring charges, and
    (gain) loss on sale of facilities. 
iii.Net income in fiscal 2013 and 2014 reflects the Company's adoption of
    IAS19r. 

INTERNAL CONTROL OVER FINANCIAL REPORTING

The Chief Executive Officer and Chief Financial Officer have each signed form "52-109F2 - Certification of Interim Filings" and filed it with the appropriate securities regulators in Canada in compliance with National Instrument 52-109: Certification of Disclosure in Issuers' Annual and Interim Filings issued by the Canadian Securities Administrators. There has been no change in Ridley's internal controls over financial reporting or disclosure controls and procedures that occurred during the most recent interim period that has materially affected, or is reasonably likely to materially affect, Ridley's internal control over financial reporting.

FORWARD-LOOKING INFORMATION

This report contains "forward-looking" information. The forward-looking information includes statements concerning Ridley's outlook for the future, as well as other statements of beliefs, plans and strategies or anticipated events, and similar expressions concerning matters that are not historical facts. Forward-looking information and statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, contemplated or implied by, such statements. These risks and uncertainties include the ability to make effective acquisitions and successfully integrate newly acquired businesses into existing operations, the availability and prices of raw materials and supplies, livestock disease, product pricing, the competitive environment and related market conditions, operating efficiencies, access to capital, the cost of compliance with environmental and health standards and other regulatory requirements affecting Ridley's business, adverse results from ongoing litigation, and actions of domestic and foreign governments. Other risks are outlined in the Risk Management section of the MD&A included in Ridley's Annual Report. Unless otherwise required by applicable securities law, Ridley disclaims any intention or obligation to publicly update or revise this information, whether as a result of new information, future events or otherwise. Ridley cautions readers not to place undue reliance upon forward-looking statements.

OUTLOOK

The major external drivers of Ridley's animal nutrition business are the prevailing economic conditions for producers of meat, milk and egg products, as well as market dynamics for feed ingredients purchased by producers or used as raw materials in the production of feed products, and weather related factors that affect the availability and quality of pastures and forages for livestock. In the long run, the commercial feed industry will be positively influenced by rising global demand for animal protein products, but will be challenged by the consolidation of livestock and poultry producers into larger and more integrated operations and, in North America, the excess capacity of feed production facilities and competition for fewer customers with consequential pressure on profit margins.

In response to this environment, Ridley has focused on developing its higher value-added product mix, including feed supplements, block products and premixes, and reaching new markets, including the growing lifestyle segments. Ridley continues to improve its cost competitiveness by managing overhead expenses and improving operating efficiencies through consolidation of excess capacity, production automation, adoption of lean manufacturing techniques, and better utilization of information technology.

Current economic conditions are generally favourable to most producers of meat, milk and egg products and have been a positive influence on Ridley's results this year. Feed ingredient costs, which comprise the majority of expense in livestock and poultry production, declined throughout the first half of the current fiscal year with a corresponding improvement in producers' financial condition. The contraction of herd populations during previous periods of high feed costs and drought now provide support to producer prices in most sectors of livestock and poultry production.

Ridley's financial results last year were significantly impacted by drought conditions that stimulated demand for feed supplementation in the beef sector. With the easing of drought conditions this year, market demand for Ridley's beef feed products has returned to a more normal level. However, demand in other animal production sectors, including dairy, poultry, swine and equine, has responded positively this year to good producer economics.

Ridley Inc., headquartered in Mankato, Minnesota, is one of North America's leading commercial animal nutrition companies. Ridley employs approximately 700 people in the manufacture, sales and marketing of a full range of animal nutrition products under highly regarded trade names. Ridley's common shares are listed on The Toronto Stock Exchange (trading symbol: RCL). Additional information, including the notes to the interim financial statements and Ridley's Annual Information Form (AIF), are available at www.sedar.com. Visit our website at www.ridleyinc.com.

CONSOLIDATED BALANCE SHEETS

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


                                               March 31   June 30  March 31
                                        Note       2014      2013      2013
---------------------------------------------------------------------------
---------------------------------------------------------------------------
ASSETS                                                                     
Current assets                                                             
  Cash                                           7,173        329     2,049
  Accounts receivable                           26,076     25,133    27,532
  Inventories                              7    43,493     41,978    42,848
  Income taxes recoverable                         124          -         -
  Prepaid and other current assets               1,345        841     1,347
  Current portion of loans receivable              410        355       738
---------------------------------------------------------------------------
Total current assets                            78,621     68,636    74,514
Non-current assets                                                         
  Loans receivable                                 143         64        65
  Assets-held-for-sale                     9       200        330       330
  Property, plant and equipment                 63,647     64,188    64,066
  Deferred income tax asset                      7,342      7,407     7,618
  Other assets                                      21          -         -
  Investment in associate                 12    17,086     17,218    17,533
  Intangible assets                              8,218      8,676     8,796
  Goodwill                                      38,928     38,928    38,928
---------------------------------------------------------------------------
Total non-current assets                       135,585    136,811   137,336
---------------------------------------------------------------------------
TOTAL ASSETS                                   214,206    205,447   211,850
---------------------------------------------------------------------------
---------------------------------------------------------------------------
                                                                           
LIABILITIES and SHAREHOLDERS' EQUITY                                       
Current liabilities                                                        
  Outstanding cheques in excess of bank                                    
   balances                                      3,122      4,234     1,666
  Accounts payable and accrued                                             
   liabilities                                  32,945     30,676    29,382
  Advances from customers                        2,227        667     1,761
  Income taxes payable                             198      1,793     4,879
  Current portion of long-term debt                  -          -        61
---------------------------------------------------------------------------
Total current liabilities                       38,492     37,370    37,749
Non-current liabilities                                                    
  Long-term debt                                     -     12,026       407
  Deferred income tax liability                 16,814     16,989    16,502
  Other accrued liabilities                      1,760      1,028     1,051
  Post-employment benefit obligations           19,067     17,110    17,236
---------------------------------------------------------------------------
Total non-current liabilities                   37,641     47,153    35,196
---------------------------------------------------------------------------
Total liabilities                               76,133     84,523    72,945
---------------------------------------------------------------------------
                                                                           
Shareholders' equity                                                       
Share capital                             14    53,159     53,159    53,159
                                                                           
Retained earnings                               85,223     66,897    84,294
Accumulated other comprehensive income                                     
 (loss)                                           (309)       868     1,452
---------------------------------------------------------------------------
                                                84,914     67,765    85,746
---------------------------------------------------------------------------
Total shareholders' equity                     138,073    120,924   138,905
---------------------------------------------------------------------------
TOTAL LIABILITIES and SHAREHOLDERS'                                        
 EQUITY                                        214,206    205,447   211,850
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Refer to accompanying notes to the interim consolidated financial statements. Certain prior year figures have been restated as required by IAS 19r - See Note 5.

Approved by the Board of Directors

(signed) B.P. Martin, Director

(signed) W. Harden, Director

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

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


                                 Three Months Ended     Nine Months Ended  
                                       March 31              March 31      
                               --------------------------------------------
                           Note      2014       2013       2014       2013 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Revenue                           147,581    144,571    434,037    444,697 
Cost of sales                 7   124,136    122,373    368,952    381,580 
---------------------------------------------------------------------------
Gross profit                       23,445     22,198     65,085     63,117 
---------------------------------------------------------------------------
                                                                           
Operating (income)                                                         
 expenses                                                                  
Technical services,                                                        
 selling and                                                               
 administrative                    12,803     13,292     38,180     37,329 
Other expense (income)               (112)       (22)      (363)      (460)
Gain on sale of facilities    9         -          -       (420)         - 
Research and development               97        177        335        447 
Asset impairment              9         -          -        203          - 
Restructuring                           6          -         55          - 
---------------------------------------------------------------------------
Net operating expenses             12,794     13,447     37,990     37,316 
---------------------------------------------------------------------------
                                                                           
Operating income                   10,651      8,751     27,095     25,801 
Share of net income of                                                     
 associate                   12       396        280        732        461 
Finance expense                      (234)      (359)      (766)    (1,142)
Finance income                         25        263         85        794 
---------------------------------------------------------------------------
Income before income taxes         10,838      8,935     27,146     25,914 
                                                                           
Income tax expense           13     2,870      3,396      8,820      9,551 
---------------------------------------------------------------------------
Net income from continuing                                                 
 operations                         7,968      5,539     18,326     16,363 
                                                                           
Net income (loss) from                                                     
 discontinued operations     11         -       (126)         -        493 
                                                                           
Net income for the period           7,968      5,413     18,326     16,856 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
                                                                           
Retained earnings,                                                         
 beginning of period               77,255     78,881     66,897     67,438 
Net income for the period           7,968      5,413     18,326     16,856 
---------------------------------------------------------------------------
Retained earnings, end of                                                  
 period                            85,223     84,294     85,223     84,294 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
                                                                           
Net income per share from                                                  
 continuing operations,                                                    
 basic and diluted                   0.62       0.43       1.43       1.28 
                                                                           
Net income (loss) per                                                      
 share from discontinued                                                   
 operations, basic and                                                     
 diluted                                -      (0.01)         -       0.04 
                                                                           
Net income per share,                                                      
 basic and diluted                   0.62       0.42       1.43       1.32 
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Refer to accompanying notes to the interim consolidated financial statements. Certain prior year figures have been restated as required by IAS 19r - See Note 5.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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


                                  Three Months Ended    Nine Months Ended  
                                        March 31             March 31      
                                -------------------------------------------
                            Note      2014       2013       2014       2013
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net income for the period            7,968      5,413     18,326     16,856
Items that will not be                                                     
 reclassified to net                                                       
 income:                                                                   
Transition adjustment          5                                           
 related to the adoption of                                                
 IAS 19r                                 -        184          -        552
Items that may be                                                          
 reclassified to net                                                       
 income:                                                                   
Unrealized gain (loss) on                                                  
 translation of financial                                                  
 statements of related                                                     
 entities with foreign                                                     
 functional currency to                                                    
 U.S. dollar reporting                                                     
 currency                             (899)      (594)    (1,177)        33
Accumulated currency                                                       
 translation losses                                                        
 reclassified to net income                                                
 upon disposal of Canadian                                                 
 business unit                11         -          -          -      2,142
---------------------------------------------------------------------------
Other comprehensive income                                                 
 (loss) for the period                (899)      (594)    (1,177)     2,175
                                                                           
Comprehensive income for                                                   
 the period                          7,069      5,003     17,149     19,583
---------------------------------------------------------------------------
---------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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


                                                     Accumulated           
                                                           other           
                                 Share  Retained   comprehensive      Total
                        Note   capital  earnings   income (loss)     Equity
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Balance at June 30,                                                        
 2012                           53,159    67,438         (1,275)   119,322 
---------------------------------------------------------------------------
                                                                           
Change in currency                                                         
 translation                         -         -          2,175      2,175 
Net income for the                                                         
 period                              -    16,856              -     16,856 
Transition adjustment                                                      
 related to the                                                            
 adoption of IAS 19r       5         -         -            552        552 
---------------------------------------------------------------------------
Balance at March 31,                                                       
 2013                     14    53,159    84,294          1,452    138,905 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
                                                                           
                                                    Accumulated            
                                                          other            
                                 Share  Retained  comprehensive       Total
                        Note   capital  earnings  income (loss)      Equity
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Balance at June 30,                                                        
 2013                           53,159    66,897            868    120,924 
---------------------------------------------------------------------------
                                                                           
Change in currency                                                         
 translation                         -         -         (1,177)    (1,177)
Net income for the                                                         
 period                              -    18,326              -     18,326 
---------------------------------------------------------------------------
Balance at March 31,                                                       
 2014                     14    53,159    85,223           (309)   138,073 
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Accumulated other comprehensive income is comprised of the unrealized loss on translation of financial statements of related entities with foreign functional currency to U.S. dollar reporting currency and the transition adjustment between retained earnings and accumulated other comprehensive income related to the adoption of IAS19r (see Note 5).

Refer to accompanying notes to the interim consolidated financial statements. Certain prior year figures have been restated as required by IAS 19r - See Note 5.

CONSOLIDATED STATEMENTS OF CASH FLOWS

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


                                 Three Months Ended     Nine Months Ended  
                                       March 31              March 31      
                               --------------------------------------------
                           Note      2014       2013       2014       2013 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Cash flow from operating                                                   
 activities                                                                
Net income for the period           7,968      5,413     18,326     16,856 
Add (deduct) items not                                                     
 affecting cash:                                                           
  Depreciation of                                                          
   property, plant and                                                     
   equipment                        1,585      1,497      4,677      4,848 
  Deferred income taxes               (56)      (401)      (487)       291 
  Asset impairment loss       9         -          -        203          - 
  Share of net income of                                                   
   associate                 12      (396)      (280)      (732)      (461)
  (Gain) loss on sale of                                                   
   property, plant and                                                     
   equipment                           (6)        (6)        11        184 
  Gain on sale of                                                          
   facilities                 9         -          -       (420)         - 
  Gain on disposal of                                                      
   Canadian business unit    11         -        (63)         -     (3,803)
  Other amortization                  303        274        770        664 
  Other items not                                                          
   affecting cash                       7         94         20         21 
---------------------------------------------------------------------------
                                    9,405      6,528     22,368     18,600 
Net change in non-cash                                                     
 working capital and other                                                 
 balances related to                                                       
 operations:                                                               
  Accounts receivable               4,105      3,498       (943)    (5,406)
  Inventories                 7    (3,936)       (45)    (1,515)    (3,053)
  Prepaid and other                                                        
   current assets                     233        287       (504)      (392)
  Accounts payable and                                                     
   accrued liabilities              2,676     (5,168)     5,030      3,007 
  Advances from customers            (722)    (2,528)     1,560        899 
  Income taxes payable and                                                 
   recoverable                     (1,594)     2,293     (1,719)     3,428 
---------------------------------------------------------------------------
                                      762     (1,663)     1,909     (1,517)
---------------------------------------------------------------------------
Net cash from operating                                                    
 activities                        10,167      4,865     24,277     17,083 
---------------------------------------------------------------------------
                                                                           
Cash flow from investing                                                   
 activities                                                                
  Proceeds on disposal of                                                  
   property, plant and                                                     
   equipment and                                                           
   facilities                          29         26        789         35 
  Proceeds on disposal of                                                  
   Canadian business unit    11         -          -          -      2,076 
  Purchase of property,                                                    
   plant and equipment               (900)    (1,521)    (4,589)    (7,986)
  Purchase of intangible                                                   
   assets                            (262)       (81)      (312)      (210)
  (Increase) decrease in                                                   
   loans receivable, net              200        747       (134)       341 
  Business acquisitions      10         -          -          -     (5,732)
  Distributions from                                                       
   associate                 12         -          -          -      7,944 
---------------------------------------------------------------------------
Net cash for investing                                                     
 activities                          (933)      (829)    (4,246)    (3,532)
                                                                           
Cash flow from financing                                                   
 activities                                                                
  Repayment of short- and                                                  
   long-term debt                  (4,781)   (12,810)   (17,434)   (21,434)
  Proceeds from short- and                                                 
   long-term debt                       -          -      5,367     10,859 
---------------------------------------------------------------------------
Net cash for financing                                                     
 activities                        (4,781)   (12,810)   (12,067)   (10,575)
                                                                           
Effect of exchange rate                                                    
 changes on cash                       (3)       (26)        (8)       (52)
Increase (decrease) in                                                     
 cash and cash equivalents          4,450     (8,800)     7,956      2,924 
Cash and cash equivalents                                                  
 - beginning of period               (399)     9,183     (3,905)    (2,541)
---------------------------------------------------------------------------
Cash and cash equivalents                                                  
 - end of period                    4,051        383      4,051        383 
Cash and cash equivalents                                                  
 are comprised of:                                                         
  Cash                              7,173      2,049      7,173      2,049 
  Outstanding cheques in                                                   
   excess of bank balances         (3,122)    (1,666)    (3,122)    (1,666)
---------------------------------------------------------------------------
                                    4,051        383      4,051        383 
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Refer to accompanying notes to the interim consolidated financial statements. Certain prior year figures have been restated as required by IAS 19r - See Note 5.

Contacts:
Ridley Inc.
Steve VanRoekel
President & CEO
(507) 388-9400

Ridley Inc.
Gordon Hildebrand
Chief Financial Officer
(507) 388-9400
www.ridleyinc.com

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