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Rogers Sugar Inc.: Interim Report for the 2nd Quarter 2013 Results

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MONTREAL, QUEBEC -- (Marketwired) -- 05/01/13 -- Rogers Sugar Inc. (TSX: RSI)

Message to Shareholders: On behalf of the Board of Directors, I am pleased to present the unaudited condensed consolidated interim financial results of Rogers Sugar Inc. (the "Company") for the three and six months ended March 30, 2013.

Volume for the second quarter was 150,914 metric tonnes, as opposed to 146,494 metric tonnes in the comparable quarter of last year, an increase of approximately 4,400 metric tonnes. Year-to-date volume of 307,329 metric tonnes is approximately 11,900 metric tonnes lower than last year. For the quarter industrial volume was higher by approximately 8,200 metric tonnes and higher by approximately 12,900 metric tonnes year-to-date. As discussed last year, some industrial volume was lost in calendar 2012, but in large part recovered in calendar 2013, hence the increase in volume for the quarter and year-to-date. Liquid volume was also higher by approximately 300 metric tonnes for the quarter and by approximately 600 metric tonnes year-to-date due to timing in deliveries and slight increases with current customers. Consumer volume was lower by approximately 1,000 metric tonnes for the quarter and lower by 600 metric tonnes year-to-date. The volume variance for the quarter and year-to-date is due mainly to timing in customers' retail promotions. Export volume was lower by approximately 3,100 metric tonnes for the quarter and by approximately 24,900 metric tonnes year-to-date. The decrease in the quarter and year-to-date volume is due mainly to sugar sold under a special quota to the U.S. in fiscal 2012. A special quota of 136,078 metric tonnes opened, effective October 3, 2011 by the U.S. Department of Agriculture, of which 25,000 metric tonnes was allocated specifically to Canada and the balance of 111,078 to global suppliers on a first-come, first-served basis. The Company, through its cane refineries was able to enter approximately 10,000 metric tonnes against the global quota by the time it closed on October 25, 2011. As the sole producer of Canadian origin sugar in Taber Alberta, the Company was able to enter approximately 17,600 metric tonnes by the time that quota closed on November 30, 2011.

With the mark-to-market of all derivative financial instruments and embedded derivatives in non-financial instruments at the end of each reporting period, our accounting income does not represent a complete understanding of factors and trends affecting the business. Consistent with previous reporting, we therefore prepared adjusted gross margin and adjusted earnings results to reflect the performance of the Company during the period without the impact of the mark-to-market of derivative financial instruments and embedded derivatives in non-financial instruments. At the end of the second quarter the earnings before interest and income taxes ("EBIT") had a mark-to-market gain of $3.0 million for the quarter and of $4.0 million year-to-date, which was deducted to calculate the adjusted EBIT and gross margin results. The major reasons of this mark-to-market gain are the timing in the settlement of derivative financial instruments and movement in raw sugar values.

For the quarter, adjusted gross margin decreased by approximately $3.2 million, when compared to the same quarter of last year. On a per metric tonne basis, adjusted gross margin was $131.87 compared to $157.45 for the second quarter of last year. The decrease in the adjusted gross margin rate is due to the sales mix with higher industrial and liquid volume combined with lower export volume. In the comparable quarter of last year, high margin rate export volume was realized under a U.S. special quota. In addition, the Montreal facility incurred approximately $1.0 million in additional energy costs due to the purchase of expensive auxiliary natural gas and oil when supply was interrupted during cold winter days as per the delivery terms of the natural gas provider. Year-to-date adjusted gross margin was $11.4 million lower than last year's comparable period while the adjusted gross margin rate per tonne was $160.96 as compared to $190.62 in fiscal 2012. The decrease was due mainly to an unfavourable sales mix with no volume of higher margin rate export volume sold under a U.S. special quota in fiscal 2013.

Adjusted EBIT of $13.1 million was $3.7 million lower when compared to the same quarter last year due in large part to the decrease in the average selling margin rate and to higher administration expenses of approximately $0.6 million as a result of timing in expenses. Year-to-date adjusted EBIT of $35.7 million was $11.9 million lower than last year due mainly to the higher gross margins earned on export volume against the special U.S. quota shipments in fiscal 2012.

For the quarter, free cash flow was $7.2 million, as compared to $12.8 million in fiscal 2012. Year-to-date free cash flow was $25.3 million, a decrease of $9.2 million over last year's comparable period. The decrease for the quarter of $5.6 million was due mainly to the lower adjusted EBIT of $3.7 million and higher current income taxes of $2.3 million from last year's comparable quarter. The year-to-date decrease of $9.2 million is also due to the lower adjusted EBIT of $11.9 million and higher current income taxes of $1.2 million somewhat offset by deferred financing costs of $2.7 million incurred in fiscal 2012 on the issue of the 5th series convertible debentures and higher pension contribution of $0.7 million in fiscal 2012.

Industrial volume will be higher in fiscal 2013 as additional volume has been contracted for calendar 2013 with new and existing accounts. In addition, the Company was able to contract for one year, starting in the spring of 2013, additional liquid sugar with one large bottler in western Canada. This should increase liquid volume in the second half of the fiscal year. Export volume is forecast to be lower this year as no U.S. special quotas are expected during the year due to large crops in the U.S. and Mexico. Overall the annual sales volume is forecast to be higher than last year.

The Taber sugar beet slicing campaign was completed in early February. We are now estimating total beet sugar production of approximately 122,000 metric tonnes, once the thick juice campaign is completed in the spring of 2013. This production volume is larger than our current sales estimate for that region which will result in a significant level of inventories being warehoused until next year if other export or domestic sales opportunities do not occur. This will increase distribution costs in the second half of the fiscal year. As a result of the large beet crop harvested in the fall of 2012 and processed this year only 24,000 acres is targeted for planting this spring.

Negotiations for both the Montreal and Vancouver labour contracts, that expired on February 28, 2013, started during the quarter. Discussions are on-going with the intent of reaching satisfactory agreements over the coming weeks.

FOR THE BOARD OF DIRECTORS, SIGNED Stuart Belkin, Chairman Vancouver, British Columbia - May 1, 2013



MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") dated May 1, 2013 of Rogers Sugar Inc. ("Rogers") should be read in conjunction with the unaudited condensed consolidated interim financial statements and notes thereto for the periods ended March 30, 2013, as well as the audited consolidated financial statements and MD&A for the year ended September 29, 2012. The quarterly condensed consolidated financial statements and any amounts shown in this MD&A were not reviewed or audited by our external auditors.

Management is responsible for preparing the MD&A. This MD&A has been reviewed and approved by the Audit Committee of Rogers and its Board of Directors.

Non-GAAP measures

In analyzing our results, we supplement our use of financial measures that are calculated and presented in accordance with GAAP, with a number of non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company's historical performance, financial position or cash flow that excludes (includes) amounts, or is subject to adjustments that have the effect of excluding (including) amounts, that are included (excluded) in most directly comparable measures calculated and presented in accordance with GAAP. Non-GAAP financial measures are not standardized; therefore, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar businesses. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.

We use these non-GAAP financial measures in addition to, and in conjunction with, results presented in accordance with GAAP. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting our business.

In the MD&A, we discuss the non-GAAP financial measures, including the reasons that we believe that these measures provide useful information regarding our financial condition, results of operations, cash flows and financial position, as applicable and, to the extent material, the additional purposes, if any, for which these measures are used. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in the MD&A.

Forward-looking statements

This report contains certain forward-looking statements, which reflect the current expectations of Rogers and Lantic Inc. (together referred to as "the Company") with respect to future events and performance. Wherever used, the words "may" "will," "anticipate," "intend," "expect," "plan," "believe," and similar expressions identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Although this is not an exhaustive list, the Company cautions investors that statements concerning the following subjects are, or are likely to be, forward-looking statements: future prices of raw sugar, natural gas costs, the opening of special refined sugar quotas in the United States, beet production forecasts, the status of labour contracts and negotiations, the level of future dividends and the status of government regulations and investigations. Forward-looking statements are based on estimates and assumptions made by the Company in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate and reasonable in the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. This could cause actual performance or results to differ materially from those reflected in the forward-looking statements, historical results or current expectations.

Additional information relating to the Company, including the Annual Information Form, Quarterly and Annual reports and supplementary information is available on SEDAR at www.sedar.com.

Internal disclosure controls

In accordance with Regulation 52-109 respecting certification of disclosure in issuers' interim filings, the Chief Executive Officer and Chief Financial Officer have designed or caused it to be designed under their supervision, disclosure controls and procedures.

In addition, the Chief Executive Officer and Chief Financial Officer have designed or caused it to be designed under their supervision internal controls over financial reporting ("ICFR") to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes.

The Chief Executive Officer and the Chief Financial Officer have evaluated whether or not there were any changes to its ICFR during the three month period ended March 30, 2013 that have materially affected, or are reasonably likely to materially affect, the Company's ICFR. No such changes were identified through their evaluation.

Results of operations

--------------------------------------------------------------------------------------------------------------------------------------------------------Consolidated Results For the three months For the six months ended ended----------------------------------------------------------------------------(In thousands of dollars, March 30, March 31, March 30, March 31, except for volume and per 2013 2012 2013 2012 share information) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Volume (metric tonnes) 150,914 146,494 307,329 319,248--------------------------------------------------------------------------------------------------------------------------------------------------------Revenues $ 131,819 $ 144,132 $ 274,195 $ 319,937Gross margin 22,851 17,923 53,490 41,577Administration and selling expenses 5,217 4,652 9,829 9,230Distribution expenses 1,613 1,688 3,942 3,995----------------------------------------------------------------------------Earnings before interest and provision for income taxes (EBIT) $ 16,021 $ 11,583 $ 39,719 $ 28,352Net finance costs 1,841 2,092 4,043 4,984Provision for income taxes 3,746 2,963 9,109 6,960----------------------------------------------------------------------------Net earnings $ 10,434 $ 6,528 $ 26,567 $ 16,408----------------------------------------------------------------------------Net earnings per share - basic $ 0.11 $ 0.07 $ 0.28 $ 0.18--------------------------------------------------------------------------------------------------------------------------------------------------------



In the normal course of business, the Company uses derivative financial instruments consisting of sugar futures, foreign exchange forward contracts, natural gas futures and interest rate swaps. The Company sells refined sugar to some clients in US dollars. These sales contracts are viewed as having an embedded derivative if the functional currency of the customer is not US dollars, the embedded derivative being the source currency of the transaction, U.S. dollars. Derivative financial instruments and embedded derivatives are marked-to-market at each reporting date, with the unrealized gains/losses charged to the consolidated statement of earnings with a corresponding offsetting amount charged to the statement of financial position.

Management believes that the Company's financial results are more meaningful to management, investors, analysts and any other interested parties when financial results are adjusted by the gains/losses from financial derivative instruments and from embedded derivatives for which adjusted financial results provide a more complete understanding of factors and trends affecting our business. This measurement is a non-GAAP measurement.

Management uses the non-GAAP adjusted results of the operating company to measure and to evaluate the performance of the business through its adjusted gross margin, adjusted EBIT and adjusted net earnings. In addition, management believes that these measures are important to our investors and parties evaluating our performance and comparing such performances to our past results. Management also uses adjusted gross margin, adjusted EBIT and adjusted net earnings when discussing results with the Board of Directors, analysts, investors, banks and other interested parties.

The results of operations would therefore need to be adjusted by the following:

--------------------------------------------------------------------------------------------------------------------------------------------------------Income (loss) For the three months For the six months ended ended(In thousands) March 30, March 31, March 30, March 31, 2013 2012 2013 2012 (Unaudited) (Unaudited) (Unaudited) (Unaudited)--------------------------------------------------------------------------------------------------------------------------------------------------------Mark-to-market adjustment (excluding interest swap) $ (543) $ (2,136) $ (3,805) $ (9,955)Cumulative timing differences 3,495 (3,006) 7,829 (9,322)----------------------------------------------------------------------------Total adjustment to cost of sales $ 2,952 $ (5,142) $ 4,024 $ (19,277)--------------------------------------------------------------------------------------------------------------------------------------------------------



A significant part of the above mark-to-market adjustment relates to the movement in the price of raw sugar during the quarter. As a result, a $2.3 million loss was recorded as compared to a mark-to-market gain of $1.5 million in the comparable quarter of last year. Year-to-date a mark-to-market loss of $6.3 million was recorded as compared to a mark-to-market loss of $2.3 million in the comparable period of fiscal 2012. For natural gas a mark-to-market gain of $0.4 million and of $0.1 million were recorded in the second quarter and year-to-date respectively, versus a loss of $2.0 million in the comparable quarter of last year and of $4.6 million year-to-date, as natural gas prices declined drastically in fiscal 2012. Foreign exchange forward contracts and embedded derivatives, on which foreign exchange movements have an impact, had a combined mark-to-market gain of $1.4 million for the quarter and of $2.3 million year-to-date. For the comparable periods the combined mark-to-market adjustment was a loss of $1.7 million for the quarter and $3.1 million year-to-date.

The cumulative timing differences are as a result that mark-to-market gains or losses are recognized by the Company only when sugar is sold to a customer and when natural gas is used. The gains or losses on the sugar and related foreign exchange paper transactions are largely offset by corresponding gains or losses from the physical transactions being the sale and purchase contracts with customers and suppliers. This adjustment is added to the mark-to-market results to arrive at the total adjustment to cost of sales. For the second quarter the total cost of sales adjustment is a gain of $3.0 million to be deducted from the consolidated operating results while a total cost of sales loss of $5.1 million was added to the consolidated operating results in fiscal 2012 comparable quarter. Year-to-date a gain of $4.0 million was deducted from the consolidated results while a total cost of sales loss of $19.3 million was added to the consolidated results of last year's comparable period.

In addition, the Company recorded a mark-to-market gain of $0.9 million for the quarter and of $1.4 million year-to-date, as compared to a gain of $0.7 million and of $1.5 million year-to-date for the comparable periods of last year, on the mark-to-market of an interest swap under short-term interest expense, as losses recorded in previous quarters are reversed with the passage of time of the swap.

The following table shows the adjusted consolidated results (non-GAAP) without the above mark-to-market results:

--------------------------------------------------------------------------------------------------------------------------------------------------------Consolidated Results For the three months For the six months ended ended March 30, March 31, March 30, March 31, 2013 2012 2013 2012 (Unaudited) (Unaudited) (Unaudited) (Unaudited)----------------------------------------------------------------------------Gross margin as per financial statements $ 22,851 $ 17,923 $ 53,490 $ 41,577Adjustment as per above (2,952) 5,142 (4,024) 19,277----------------------------------------------------------------------------Adjusted gross margin 19,899 23,065 49,466 60,854----------------------------------------------------------------------------EBIT as per financial statements 16,021 11,583 39,719 28,352Adjustment as per above (2,952) 5,142 (4,024) 19,277----------------------------------------------------------------------------Adjusted EBIT 13,069 16,725 35,695 47,629----------------------------------------------------------------------------Net earnings as per financial statements 10,434 6,528 26,567 16,408Adjustment to cost of sales as per above (2,952) 5,142 (4,024) 19,277Adjustment for mark-to- market of finance costs (951) (674) (1,429) (1,459)Deferred taxes on above adjustments 1,021 (1,155) 1,325 (4,624)----------------------------------------------------------------------------Adjusted net earnings $ 7,552 $ 9,841 $ 22,439 $ 29,602----------------------------------------------------------------------------Net earnings per share basic, as per financial statements $ 0.11 $ 0.07 $ 0.28 $ 0.18Adjustment for the above (0.03) 0.03 (0.04) 0.14----------------------------------------------------------------------------Adjusted net earnings per share basic $ 0.08 $ 0.10 $ 0.24 $ 0.32--------------------------------------------------------------------------------------------------------------------------------------------------------



For the quarter, total volume increased by approximately 4,400 metric tonnes from the comparable quarter of fiscal 2012. Industrial volume increased by approximately 8,200 metric tonnes due mainly to gain of additional volume with existing and new customers. Liquid volume was also higher by approximately 300 metric tonnes again due to gains in that sale market segment. Consumer volume decreased by approximately 1,000 metric tonnes due mainly to timing of customers' retail promotions. Export volume decreased by approximately 3,100 metric tonnes. A special refined sugar quota of 136,078 metric tonnes was opened, effective October 3, 2011 by the U.S. Department of Agriculture, of which 25,000 metric tonnes was allocated directly to Canada and the balance of 111,078 metric tonnes to global suppliers on a first-come, first-served basis. The Company through its cane refineries was able to enter approximately 10,000 metric tonnes against the global quota by the time it closed on October 25, 2011, and an additional volume of 17,600 metric tonnes from its beet sugar plant by the time the Canada specific quota closed on November 30, 2011.

Year-to-date volume decreased by approximately 11,900 metric tonnes due in large part to the decrease in export volume of 24,900 metric tonnes for the reasons discussed above. This decrease was partially offset by an increase in industrial volume of approximately 12,900 metric tonnes, due to gain of additional volume from existing and new customers and an increase in the liquid segment of approximately 600 metric tonnes due to gains in that segment. Consumer volume is lower by approximately 600 metric tonnes year-to-date due mainly to timing of customers' retail promotion.

Revenues for the quarter were approximately $12.3 million lower than the previous year comparable quarter, due to the lower value of raw sugar prices during the quarter when compared to the previous year. Year-to-date revenues are $45.7 million lower due mainly to the lower raw sugar values and to higher selling values of U.S. export volume in fiscal 2012.

As previously mentioned, gross margin of $22.9 million for the quarter and $53.5 million year-to-date do not reflect the economic margin of the Company, as it includes gains of $3.0 million for the quarter and $4.0 million year-to-date for the mark-to-market of derivative financial instruments explained earlier. We will therefore comment on adjusted gross margin results.

For the quarter, adjusted gross margin decreased by approximately $3.2 million, when compared to the same quarter of last year. On a per metric tonne basis, adjusted gross margins were $131.87 compared to $157.45 for the comparable quarter of last year, a decrease of $25.58 per metric tonne. The decrease in the adjusted gross margin rate is due mainly to the sales mix with higher industrial and liquid volume combined with lower export volume. In the comparable quarter of last year, high margin rate export sales were realized under a U.S. special quota. In addition, the Montreal facility incurred approximately $1.0 million in additional energy costs due to the purchase of expensive auxiliary natural gas and oil, when supply was interrupted during cold winter days, as per the delivery terms of the natural gas provider. Year-to-date adjusted gross margin was $11.4 million lower than last year's comparable period. Adjusted gross margin rate per tonne was $160.96 as compared to $190.62 in fiscal 2012 for the comparable period. The decrease was due mainly to a different sales mix with no volume of higher margin export sales sold under a U.S. special quota in fiscal 2013.

Administration and selling costs were higher by approximately $0.6 million for the quarter and year-to-date than the comparable periods of fiscal 2012. The increase is due mainly to timing in expenses.

Distribution costs for the quarter were consistent with last year for the quarter and year-to-date.

Finance costs for the quarter include, for the interest swap expiring in July 2013, a mark-to-market gain of $0.9 million and of $1.4 million year-to-date, as compared to a gain of $0.7 million and $1.5 million year-to-date in fiscal 2012. Without the above mark-to-market adjustment, finance expense for the quarter was comparable to the previous year quarterly result. Year-to-date finance expense is lower by approximately $0.9 million due mainly to the write-off of deferred financing charges of approximately $0.6 million as a result of the early redemption of the third series convertible debentures in fiscal 2012.

Provision for income taxes includes a deferred tax expense of $1.0 million for the quarter and $1.3 million year-to-date for the mark-to-market adjustment as compared to a recovery of $1.2 million for the quarter and $4.6 million year-to-date for the comparable periods of last year. On an adjusted basis the provision for income taxes was approximately $2.7 million for the quarter and $7.8 million year-to date as compared to a provision of $4.1 million for the quarter and $11.6 million year-to-date for the comparable periods of last year. The decrease for the quarter and year-to-date is due mainly to the decrease in adjusted earnings before income taxes as a result of the lower adjusted gross margins.

Statement of quarterly results

The following is a summary of selected financial information of the consolidated financial statements and non-GAAP measures of the Company for the last eight quarters.

-------------------------------------------------------------------------------------------------------------------------------------------------------- 2013 2012 (Unaudited) (Unaudited)(In thousands of dollars, except for volume, margin rate and per share information) 2-Q 1-Q 4-Q 3-Q 2-Q 1-Q----------------------------------------------------------------------------Volume (MT) 150,914 156,415 164,539 157,786 146,494 172,754 ------------------------------------------------ ------------------------------------------------Revenues 131,819 142,376 150,469 147,687 144,132 175,805Gross margin 22,851 30,639 18,077 18,207 17,923 23,654EBIT 16,021 23,698 11,072 11,180 11,583 16,769Net earnings 10,434 16,133 6,944 6,909 6,528 9,880Gross margin rate per MT 151.42 195.88 109.86 115.39 122.35 136.92Per shareNet earnings Basic 0.11 0.17 0.07 0.07 0.07 0.11 Diluted 0.11 0.16 0.07 0.07 0.07 0.10Non-GAAP MeasuresAdjusted gross margin 19,899 29,567 21,696 19,642 23,065 37,789Adjusted EBIT 13,069 22,626 14,691 12,615 16,725 30,904Adjusted net earnings 7,552 14,887 9,782 7,641 9,841 19,761Adjusted gross margin rate per MT 131.87 189.02 131.86 124.49 157.45 218.74Adjusted net earnings per share Basic 0.08 0.16 0.10 0.08 0.10 0.22 Diluted 0.08 0.15 0.10 0.08 0.10 0.19-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 2011 (Unaudited)(In thousands of dollars, except for volume, margin rate and per share information) 4-Q 3-Q------------------------------------------------Volume (MT) 170,880 163,001 -------------------- --------------------Revenues 160,866 150,892Gross margin 33,507 11,637EBIT 25,679 5,061Net earnings 16,531 1,249Gross margin rate per MT 196.08 71.39Per shareNet earnings Basic 0.19 0.01 Diluted 0.16 0.01Non-GAAP MeasuresAdjusted gross margin 25,486 17,637Adjusted EBIT 17,658 11,061Adjusted net earnings 10,919 5,847Adjusted gross margin rate per MT 149.15 108.20Adjusted net earnings per share Basic 0.12 0.07 Diluted 0.11 0.07------------------------------------------------------------------------------------------------



Historically the first quarter (October to December) of the fiscal year is the best quarter for adjusted gross margins and adjusted net earnings due to the favourable sales mix of products sold. This is due to increased sales of baked goods during that period of the year. At the same time, the second quarter (January to March) is historically the lowest volume quarter, resulting in lower revenues, adjusted gross margins and adjusted net earnings.

Liquidity

The cash flow generated by the operating company, Lantic, is paid to Rogers by way of dividends and return of capital on the common shares of Lantic, and by the payment of interest on the subordinated notes of Lantic held by Rogers, after having taken reasonable reserves for capital expenditures and working capital. The cash received by Rogers is used to pay dividends to its shareholders.

Cash flow from operations was negative $9.3 million for the quarter, as opposed to positive $38.1 million in the comparable quarter of fiscal 2012. Year-to-date cash flow from operations was negative $15.0 million as opposed to positive $14.9 million for the comparable period of last year. The main reason for the decrease in cash flow from operations is due to the increase in inventories of $12.1 million in the second quarter of fiscal 2013 as opposed to a decrease of $29.2 million in the comparable period of last year due to timing in the receipt of raw sugar vessels, the additional beet sugar inventories and to the overall value of the raw sugar market. Year-to date inventories increased by $44.4 million in fiscal 2013, as opposed to $7.1 million in fiscal 2012, for the same reasons discussed above. In addition net adjusted earnings decreased by approximately $2.3 million over last year's second quarter and $7.2 million year-to-date.

Total capital expenditures for the quarter were comparable to the previous year but were $0.3 million higher year-to-date, due mainly to timing of projects when compared to fiscal 2012.

In order to provide additional information the Company believes it is appropriate to measure free cash flow, a non-GAAP measure, which is generated by the operations of the Company and can be compared to the level of dividend paid by Rogers. Free cash flow is defined as cash flow from operations excluding changes in non-cash working capital, mark-to-market and derivative timing adjustments, financial instruments non-cash amount and including capital expenditures.

Free cash flow is as follows:

---------------------------------------------------------------------------- For the three months For the six months ended ended----------------------------------------------------------------------------(In thousands of dollars) March 30, March 31, March 30, March 31, 2013 2012 2013 2012 (Unaudited) (Unaudited) (Unaudited) (Unaudited)----------------------------------------------------------------------------Cash flow from operations $ (9,296) $ 38,126 $ (14,965) $ 14,935Adjustments: Changes in non-cash working capital 21,919 (23,536) 40,824 3,957 Changes in non-cash income taxes payable (1,021) 638 1,399 6,131 Changes in non-cash interest payable (1,617) (1,510) (39) 196 Mark-to-market and derivative timing adjustments (3,903) 4,468 (5,453) 17,818 Financial instruments non- cash amount 3,570 (3,056) 6,969 (2,909) Capital expenditures (2,642) (2,611) (3,609) (3,261) Investment capital expenditures 120 217 120 258 Net issue (repurchase) of shares/convertible debentures 72 90 72 81 Deferred financing charges - (16) - (2,716)----------------------------------------------------------------------------Free cash flow $ 7,202 $ 12,810 $ 25,318 $ 34,490----------------------------------------------------------------------------Declared dividends $ 42,343 $ 7,992 $ 50,811 $ 15,981----------------------------------------------------------------------------



Free cash flow was $5.6 million lower than the comparable quarter in fiscal 2012 and by $9.2 million year-to-date. The decrease for the quarter was due mainly to the lower adjusted EBIT of $3.7 million and additional current income taxes of $2.3 million versus last year comparable quarter. The year-to-date decrease of $9.2 million is also due to the lower adjusted EBIT of $11.9 million and higher current income taxes of $1.2 million offset by deferred financing costs of $2.7 million incurred on the issuance of the 5th series convertible debentures and by higher pension contribution of approximately $0.7 million incurred in fiscal 2012.

Changes in non-cash working capital, income taxes payable and interest payable represent quarter-over-quarter movement in current assets such as accounts receivables and inventories, and current liabilities like accounts payable. Movements in these accounts are due mainly to timing in the collection of receivables, receipts of raw sugar and payment of liabilities. Increases or decreases in such accounts do not therefore constitute available cash for distribution. Such increases or decreases are financed from available cash or from the Company's available credit facilities of $200.0 million. Increases or decreases in short-term bank indebtedness are also due to timing issues from the above, and therefore do not constitute available free cash flow.

Mark-to-market and financial instruments non-cash amount combined impact of negative $0.3 million for the quarter and of positive $1.5 million year-to-date do not represent cash items as these contracts will be settled when the physical transactions occur, which is the reason for the adjustment to free cash flow.

Capital expenditures, net of investment capital, were higher by approximately $0.1 million for the quarter and by approximately $0.5 million year-to-date due mainly to timing of capital projects. Investment capital expenditures are added back as these capital projects are not required for the operation of the refineries, but are undertaken due to their substantial operational savings to be realized upon their completion.

In the second quarter an amount of $0.1 million was received following the exercise of share options by an executive of the Company, the same as the comparable quarter of fiscal 2012.

In the first quarter of fiscal 2012, the Company issued fifth series convertible unsecured subordinated debentures ("Fifth series debentures") for which an amount of approximately $2.7 million of deferred financing charges was incurred.

The Company declared and paid an additional dividend of $33.9 million based on previously earned but undistributed free cash flow of approximately $64.7 million generated in the last five fiscal years ended September 29, 2012. In addition the Company pays a quarterly dividend of 9.0 cents per common share, for a total amount of approximately $8.5 million per quarter in fiscal 2013 as opposed to a dividend of 8.5 cents per share totaling $8.0 million per quarter in the first two quarters of fiscal 2012.

Contractual obligations

There are no significant changes in the contractual obligations table disclosed in the Management's Discussion and Analysis of the September 29, 2012 Annual Report.

At March 30, 2013, the Company had commitments to purchase a total of 908,000 metric tonnes of raw sugar, of which 56,300 metric tonnes had been priced for a total dollar commitment of $27.3 million.

Capital resources

Lantic has $200.0 million as authorized line of credit available to finance its operations. This line of credit expires in June 2013. Management is confident that the line of credit can be renewed at competitive market rates. At quarter's end, $105.0 million had been drawn from the working capital facility and $3.6 million in cash and cash equivalents was also available. Inventories were high at quarter end due mainly to the large beet crop harvested and processed in Taber and to the receipt of a raw sugar vessel at the end of the quarter.

Cash requirements for working capital and other capital expenditures are expected to be paid from available credit resources and from funds generated from operations.

Outstanding securities

During the quarter 20,000 common shares were issued following the exercise of share options by an executive. As at May 1, 2013 a total of 94,110,760 common shares were outstanding.

Future accounting changes

A number of new standards, and amendments to standards and interpretations, are not yet effective and have not been applied in preparing these unaudited condensed consolidated interim financial statements.

IFRS 9 Financial Instruments - This standard will replace IAS 39, Financial Instruments: Recognition and Measurement with a proposed single model for only two classification categories: amortized cost and fair value. The standard is currently required to be adopted for annual periods beginning January 1, 2015. The extent of the impact on the financial statements of the Company has not yet been determined.

IFRS 10 Consolidated Financial Statements - This standard provides additional guidance to determine whether an entity should be included within the consolidated financial statements of the Company. The standard is required to be adopted for annual periods beginning January 1, 2013. The extent of the impact on the financial statements of the Company has not yet been determined.

IFRS 13 Fair Value Measurement - This standard provides new guidance on fair value measurement and disclosure requirements. This standard is required to be adopted for annual periods beginning January 1, 2013. The extent of the impact on the financial statements of the Company has not yet been determined.

IAS 19 Employee Benefits - This standard includes the elimination of the option to defer the recognition of gains and losses, enhancing the guidance around measurement of plan assets and defined benefit obligations, streamlining the presentation of changes in assets and liabilities arising from defined benefit plans and the introduction of enhanced disclosures for defined benefit plans. This standard is effective for annual periods beginning January 1, 2013. The extent of the impact on the financial statements of the Company has not yet been determined.

Risk factors

Risk factors in the Company's business and operations are discussed in the Management's Discussion and Analysis of our Annual Report for the year ended September 29, 2012. This document is available on SEDAR at www.sedar.com or on one of our websites at www.lantic.ca or www.rogerssugar.com.

Outlook

Industrial volume will be higher in fiscal 2013 as additional volume has been contracted for calendar 2013 with new and existing accounts. In addition the Company was able to contract for one year, starting in the spring of 2013, additional liquid sugar with one large bottler in western Canada. This should increase liquid volume in the second half of the fiscal year. Export volume is forecast to be lower this year as no U.S. special quotas are expected during the year due to large crops in the U.S. and Mexico. Overall the annual sales volume is forecast to be higher than last year.

The Taber sugar beet slicing campaign was completed in early February. We are now estimating total beet sugar production of approximately 122,000 metric tonnes, once the thick juice campaign is completed in the spring of 2013. This production volume is larger than our current sales estimate from Taber which will result in a significant level of inventories being warehoused until next year if other export or domestic sales opportunities do not occur. This will increase distribution costs in the second half of the fiscal year.

A total of 24,000 acres is targeted for planting this season in Taber which is lower than last year due to the large carry-over of beet sugar inventories estimated for this year and sales outlook for fiscal year 2014.

Negotiations for both the Montreal and Vancouver labour contracts, that expired on February 28, 2013, have started during the quarter. Discussions are on-going with the intent of reaching satisfactory agreements over the coming weeks.

Less than half of fiscal 2013's natural gas requirements have been hedged at average prices comparable to those realized in fiscal 2012. Any un-hedged volume should benefit from the current low prices of natural gas and therefore increase adjusted gross margin rates. In addition, some futures positions for fiscal 2014 and 2015 have been taken. These positions are at prices higher than the current market values, but are at the same or better levels than what was achieved in fiscal 2012. We will continue to monitor natural gas market dynamics with the objective of minimizing natural gas costs.

The complete financial statements are available at the following address: http://media3.marketwire.com/docs/RSI_FIS_Q2.pdf.



Contacts:
Mr. Dan Lafrance
SVP Finance, CFO and Secretary
(514) 940-4350
(514) 527-1610 (FAX)
www.rogerssugar.com
or www.Lantic.ca