PRT Forest Regeneration Income Fund
TSX : PRT.UN

PRT Forest Regeneration Income Fund

May 05, 2010 18:10 ET

PRT Announces Results for First Quarter of 2010

VICTORIA, BRITISH COLUMBIA--(Marketwire - May 5, 2010) - PRT Forest Regeneration Income Fund (TSX:PRT.UN) (the "Fund") today announced results for its first quarter ended March 31, 2010. Extracts from the Fund's interim financial report are enclosed as part of this release.

For the three months ended March 31, 2010, the Fund reported a net loss of $711,000 ($0.07 per unit) and Cash Available for Distribution of $94,000 ($0.01 per unit) as compared to $667,000 ($0.07 per unit) and $26,000 ($0.003 per unit) respectively for the same quarter of 2009. The loss is relatively unchanged year-over-year, despite lower contract volumes and smaller tree sizes in 2010, due to relative improvements in operating costs which has led to improved margins.

The Fund also confirmed that during the first quarter it fully repaid its Canadian bank term debt from proceeds of an insurance settlement reached in 2009.

Cash Available for Distribution, a non GAAP measure, is the Fund's measure of free cash flow from operating activities; however, in the current economic environment, the Fund is not making distributions in order to finance capital expenditures and business restructuring charges. Standardized Distributable Cash - a comparable measure of cash flow prepared under guidance issued by the Canadian Institute of Chartered Accountants - totaled $0.11 per unit in 2010 for the first quarter, as compared to negative $(0.01) per unit in 2009.

The Fund reported that revenues decreased by $0.6 million in the quarter, to $5.8 million. This was attributed to approximately 3% lower contracted seedling volumes in 2010 as well as smaller seedling sizes, partly offset by better than expected sales of seedlings to non-contract customers. While severely reduced lumber demand in the current economic cycle is showing signs of abating, the affects of any resulting increased logging activity will take at least one more season to start flowing through to the seedling market.

Production expenditures in the quarter declined with the lower seedling contract volumes, and margins improved due to ongoing cost reduction efforts and capacity consolidation actions in 2009. Selling, general and administrative expenses were roughly unchanged as cost reduction improvements were largely offset by increased insurance premiums, new program initiatives, and some expenditure timing differences.

President and CEO, Rob Miller, commented, "The decline in US housing markets reached levels not seen in more than 50 years, and the general economic downturn has created difficult operating conditions for our company and our forest product industry customers in the past few years. Our revenues and profitability have declined, but we have adapted our business for the downturn and generated positive cash flow from operations. The effects of these strategies been demonstrated in the current quarter as, even with lower volumes, margins have increased. We have also maintained or made modest increases in our market share and continued to invest in new growth strategies that we believe will enable us to adapt to new realities in the forest products industry, and to diversify our business.

We are seeing the early signs of improvement in North American forestry markets with lumber prices strengthening as well as increased market demand for Canadian wood products in Asia. The strength and pace of this recovery, however, is uncertain. Demand for forest seedlings typically lags activity in the wood products and housing markets, and coming off the weakness in these markets in 2009 we have seen lower order volumes and strong price competition in seedling markets in 2010. However, we have adapted our business to weather this downturn, by remaining focused on maximizing cash flow, keeping our balance sheet in good shape, and on providing exceptional customer service, and in doing so we are well positioned to benefit from the future recovery in forest seedling markets, as house construction returns to more typical levels.

We also believe that our actions to innovate within our forest-seedling business and to capitalize on opportunities in the bioenergy sector will enable us to develop significant new revenue streams over the long term. These present unique opportunities to expand and diversify our markets, while levering off our core expertise in seedling propagation. By focusing on maintaining strong operational capabilities, managing our balance sheet, and developing new markets we will maximize long-term value creation for unitholders."

The Fund's full Interim Report and Management's Discussion and Analysis is available at www.sedar.com.

About the Fund

PRT is the largest producer of container grown forest seedlings in North America, with 12 nursery locations expected to produce approximately 125 million seedlings in 2010. Units of the Fund are listed for trading on the Toronto Stock Exchange under the trading symbol PRT.UN.

Conference Call and Taped Replay

The Fund will host a conference call to further discuss the matters contained in this press release. The call will take place on May 6, 2010 at 11:00 AM PST, 2:00 PM EST. To participate in this conference, please call 1-877-407-8031 or 201-689-8031.

Persons unable to attend the conference call may listen to a recorded version by dialing 1-877-660-6853, account # 286, and the conference ID# 348766. This option is available through May 13, 2010. A recorded web cast version of the call may also be accessed from the Fund's website at www.prt.com.

The Fund's next earnings conference call is expected to take place on August 5, 2010 after the release of the second quarter 2010 earnings information.

Forward Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations for customer orders; the outlook for the forest industry, US housing markets, and future reforestation programs; and other statements that are not historical fact. Risks and uncertainties include, but are not limited to, future commodity prices and exchange rates, agricultural risks, our ability to grow and supply products in accordance with defined specifications, customer credit risks, and other risks identified from time to time in the Fund's annual report, and annual information return. These risks and uncertainties may cause actual results to differ materially from the expectations expressed herein. As such, readers are cautioned to not to place undue reliance on forward-looking statements.

Forward-looking statements are based on current expectations and neither the Fund nor PRT assumes any obligation to update such information to reflect later events or developments, except as required by law.



Consolidated Balance Sheets
($000's)
As at March 31, As at December 31,
2010 2009
(unaudited)
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Assets

Current assets
Accounts receivable (note 4) $ 4,926 $ 11,237
Inventories (note 5) 1,329 1,422
Prepaid expenses and deposits 465 224
Unbilled revenue (note 4) 2,270 1,801
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8,990 14,684

Investment 317 333
Property, plant and equipment (note 6) 26,825 26,739
Property, plant and equipment
held for sale (note 6) 17 775
Intangible assets 308 364
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$ 36,457 $ 42,895
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Liabilities

Current liabilities
Operating line $ 1,339 $ 3,566
Accounts payable and accrued
liabilities 2,169 1,799
Current portion of long-term debt 1,351 1,698
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4,859 7,063

Long-term debt (note 7) - 3,456

Future income taxes (note 12) - 103
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4,859 10,622
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Unitholders' Equity

Capital contributions (note 8) 90,414 90,395

Cumulative earnings 13,271 13,982
Unit option grants 97 80
Cumulative distributions declared (72,184) (72,184)
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31,598 32,273
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$ 36,457 $ 42,895
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Consolidated Statements of Earnings, Comprehensive Income and Cumulative
Earnings (unaudited)
($000's except per unit amounts and number of units outstanding)

Three months ended March 31,
2010 2009
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Revenue $ 5,758 $ 6,342
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Expenses
Costs of production 3,646 4,131
Selling, general and administration 1,817 1,821
Loss on foreign exchange 18 79
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Earnings before the following 277 311

Interest 142 162
Amortization of property, plant and equipment 329 778
Amortization of intangibles 56 67
Equity in loss of investee 15 10
Loss (gain) on disposal of property,
plant and equipment 57 (6)
Exit activity charges (note 10) 496 47
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Loss before income taxes (818) (747)

Recovery of income taxes (note 12) 107 80
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Net loss and comprehensive loss (711) (667)

Cumulative earnings - beginning of period 13,982 15,811
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Cumulative earnings - end of period $ 13,271 $ 15,144
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Basic and diluted loss per Trust Unit $ (0.07) $ (0.07)
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Weighted average number of Trust
Units outstanding 9,721,702 9,611,073
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Consolidated Statements of Cash Flows (unaudited)
($000's)
Three months ended March 31,
2010 2009
---------------------------

Cash flows from operating activities
Net loss $ (711) $ (667)
Items not affecting cash
Amortization of property, plant and
equipment (excluding seedling
containers) 329 777
Seedling container amortization
included in costs of production 166 243
Amortization of intangibles 56 67
Recovery of future income taxes (103) (86)
Loss (gain) on disposal of property,
plant and equipment 57 (6)
Equity in loss of investee 15 10
Unrealized loss on foreign exchange 166 112
Unrealized gain on interest rate swaps (64) (5)
Stock option grants (note 8) 17 15
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(72) 460

Net change in non-cash working
capital balances 1,915 (111)
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1,843 349
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Cash flows from financing activities
Distributions paid to unitholders - (192)
Repayment of long-term debt (3,916) (66)
Increase (decrease) in operating line (2,227) 112
Issuance of Trust Units 19 22
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(6,124) (124)
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Cash flows from investing activities
Purchase of property, plant and equipment (767) (431)
Proceeds from disposal of property, plant
and equipment (notes 6 and 11) 5,046 14
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4,279 (417)
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Increase (decrease) in cash - (192)

Cash - beginning of period - 192
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Cash - end of period $ - $ -
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Contact Information

  • PRT Forest Regeneration Income Fund
    Tony Pollard
    VP Finance/CFO
    (866) 553-8733 ext. 229
    www.prt.com