PRT Growing Services Ltd.
TSX : PRT

PRT Growing Services Ltd.

November 10, 2011 17:28 ET

PRT Announces Improved Results for the First Nine Months of 2011

VICTORIA, BRITISH COLUMBIA--(Marketwire - Nov. 10, 2011) - PRT Growing Services Ltd. (TSX:PRT) today announced third quarter results for the PRT Forest Regeneration Income Fund (the "Fund"). This is the last quarterly report for the Fund as, on October 1, 2011, it completed a corporate conversion and currently operates as PRT Growing Services Ltd.

First-Three Quarter's Highlights

(For the nine months ended September 30, 2011, as reported under IFRS)

  • Revenue increased 25.8% to $24.0 million compared with the first nine months of 2010.
  • Gross profit increased 26.7% to $9.2 million due to higher volumes and increased efficiencies in production.
  • The Fund increased cash from operating activities before working capital changes by $2.0 million.
  • Earnings improved $0.18 per Unit to $0.06 per Unit.
  • The Fund's balance sheet is strong with only $1.3 million in term debt and financing leases outstanding, and $16.6 million of available liquidity.
  • The Fund completed a tax deferred conversion to a publicly traded corporation, PRT Growing Services Ltd., on October 1, 2011.

Forest seedlings generally take from six months to a year or more to grow, with most being grown and harvested within the calendar year. The Fund`s quarterly results generally reflect only a portion of the revenue that accrues over the full crop cycle, and, accordingly, PRT's results are best considered in an annual context. Excerpts from the Fund's financial report are included as part of this release.

The Fund reported operating earnings of $3,229,000 and total comprehensive income of $605,000 ($0.06 per Unit) for the first-nine months of 2011, compared with $1,203,000 and a loss of $1,138,000 ($0.12 per Unit), respectively for the same period in 2010. The improved performance reflects a 41% increase in seedling order volume over 2010, mainly attributable to improving forest seedling markets due to growth in Chinese lumber exports and stabilization of the US housing market. However, lower average pricing, particularly for new seedling products, has partially moderated revenue growth in 2011.

Operating margin improvement of 7.2% resulted from scale economies due to increased volumes, nursery cost containment, and continuous improvement efforts. In addition, margins benefited from operating leverage, as certain elements of operating costs remain fixed despite volume increases.

For the three months ended September 30, 2011, the Fund reported a total comprehensive loss of $1,050,000 ($0.10 per Unit) and negative Cash Available for Distribution of ($131,000) or ($0.01) per Unit). Aggregate results were in line with management's expectations given the seasonal nature of PRT's business.

President and CEO Rob Miller remarked, "The results over the first nine months of the year are in line with our expectations and demonstrate that our strategies to adapt to the forest industry downturn are working. The US housing market remains in difficult shape, and the timeline for its recovery is uncertain. At the same time, our customers have made significant headway in developing new markets in Asia, and this has brought an increase in harvesting activity to meet their needs. We have remained ready to respond to the resulting increase in silviculture work, allowing us to reopen our shuttered Kirkland Lake, Ontario, facility and to achieve margin improvements from the increased volume and improved capacity utilization.

While the future pace of the US housing market recovery is uncertain, midterm recovery prospects remain promising, and this will have further positive long-term effects on our business. Despite this prospect, we continue to believe it is prudent to diversify our business further to generate additional growth and stability. In addition to geographic expansion within forest seedling markets, we see opportunities to expand our product line as well, including in the energy crop sector. These present unique opportunities to expand and diversify our markets while levering off our core expertise in seedling propagation. By focusing on improving our key operational capabilities, managing our balance sheet, and developing new markets, we will maximize long-term value creation for shareholders of PRT Growing Services Ltd."

Adoption of IFRS

The Fund adopted International Financial Reporting Standards ("IFRS") for 2011, with a restatement of 2010 comparatives and a transition date of January 1, 2010. As a consequence, reported results are not directly comparable with the historical financial statements of the Fund that were prepared in accordance with Canadian generally accepted accounting principles ("GAAP") before the adoption of IFRS. Full reconciliations to GAAP were reported in the March 31, 2011, condensed consolidated interim financial statements of the Fund.

Management's discussion and analysis for the Fund and the information circular are available at www.sedar.com.

About PRT Growing Services Ltd.

PRT Growing Services Ltd. (the Corporation) was formed on October 1, 2011 from the conversion of PRT Forest Regeneration Income Fund to a corporate structure. The Corporation is the largest producer of container-grown forest seedlings in North America, with 13 nursery locations expected to produce more than 175 million seedlings in 2011. Shares of the Corporation are listed for trading on the Toronto Stock Exchange under the trading symbol PRT.

Conference Call and Taped Replay

The Corporation will host a conference call to further discuss the matters contained in this press release. The call will take place on Monday, November 14, 2011, at 11:00 AM PST, 2:00 PM EST. To participate in this conference call, please call 1-877-407-8031 or 201-689-8031.

Persons unable to participate in the conference call may listen to a recorded version by dialing 1-877-660-6853, account #286, conference ID#366586. This option is available through November 21, 2011. A recorded webcast of the call may also be accessed from the Corporation's website, at www.prt.com.

The Corporation's next earnings conference call is expected to take place on Friday, March 23, 2012, after the release of the Corporation's fourth-quarter and annual 2011 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 order volumes, pricing, operating costs and other expenditures; the outlook for energy prices; plans and opportunities for capital spending; and other statements contained in this discussion that are not historical fact. Risks and uncertainties include, but are not limited to, agricultural risks and crop yield; future commodity prices; exchange rate risks; customer credit risks and customer insolvency; liquidity risk; the outlook for the forest industry; the impact of corporate conversion on reporting earnings and taxation; the impact of changes in financial reporting to IFRS; and other risks identified from time to time in the Fund's annual report and information return, prospectus, and other filing documents that are available in electronic form at www.sedar.com or by contacting the Corporation directly.

Forward-looking statements are based on current expectations, and the Corporation assumes any obligation to update such information to reflect later events or developments, except as required by law.

Excerpts from the Fund's quarterly financial report (unaudited):

Condensed Consolidated Interim Statements of Financial Position (unaudited)

(in thousands of dollars) As at
September 30,
As at
December 31,
Note 2011 2010
Assets
Current assets
Cash and cash equivalents $ 4,653 $ 92
Accounts receivable 4 4,093 6,147
Inventories 5 787 1,079
Agricultural produce 6 64 73
Biological assets, current 6 291 511
Prepaid expenses and deposits 227 218
Unbilled revenue 3,629 2,400
Property, plant and equipment held for sale 7 150
13,893 10,520
Non-current assets
Property, plant and equipment 7 35,427 36,127
Intangible assets 8 235 264
Investment in associate 294 282
Biological assets, non-current 6, 7 177 169
36,133 36,842
$ 50,026 $ 47,362
Liabilities
Current liabilities excluding net assets attributable to unitholders
Accounts payable and accrued liabilities $ 1,928 $ 2,407
Provisions 10 13 139
Unearned revenue 3,298 1,052
Current portion of finance lease 89 91
Current portion of long-term debt 12 215 198
5,543 3,886
Non-current liabilities excluding net assets attributable to unitholders
Finance lease 11 243 281
Long-term debt 12 782 880
Deferred tax liabilities 13 2,303 1,956
Unit option grants 14 428 243
9,299 7,246
Net assets attributable to unitholders 40,727 40,116
$ 50,026 $ 47,362
Memorandum Note: Total Unitholders' interests
Capital contributions (liability) 14, 15 $ 96,400 $ 96,393
Cumulative deficit 15 (55,688) (56,373)
Accumulated other comprehensive income 15 95
Net assets attributable to unitholders $ 40,727 $ 40,116

Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss) (unaudited)

(in thousands of dollars, except per Unit amounts) Three months ended September 30, Nine months ended September 30,
Note 2011 2010 2011 2010
Revenue $ 5,701 $ 4,223 $ 23,955 $ 19,043
Expenses
Costs of production 3,791 2,858 14,775 11,764
Selling, general and administration 2,129 1,815 6,166 6,011
Loss (gain) on foreign exchange (267) 72 (216) 65
Earnings (loss) before the following 48 (522) 3,229 1,203
Interest paid 33 48 91 253
Amortization of property, plant and equipment 7 595 611 1,779 1,850
Amortization of intangibles 10 45 29 156
Equity in loss (earnings) of investee (17) (21) (13) 6
Loss on disposal of property, plant and equipment 162 17 283 92
Profit (loss) before income taxes (735) (1,222) 1,061 (1,154)
Provision for income taxes 13 (223) (151) (375) (50)
Profit (loss) for the period (958) (1,372) 686 (1,204)
Exchange differences on translating foreign operations (165) 79 (107) 58
Tax recovery on other comprehensive income 72 0 27 6
Other comprehensive income (loss) (92) 79 (80) 64
Total comprehensive income (loss) $ (1,050) $ (1,293) $ 605 $ (1,139)
Basic and diluted income (loss) per Trust Unit 16 $ (0.10) $ (0.14) $ 0.06 $ (0.12)
Weighted average number of Trust Units outstanding 14 9,757,631 9,741,333 9,757,534 9,731,392

Condensed Consolidated Interim Statements of Cash Flows (unaudited)

(in thousands of dollars) Three Months ended September 30, Nine months ended September 30,
Note 2011 2010 2011 2010
Cash flows from operating activities
Profit (loss) for the period $ (958) $ (1,372) $ 686 $ (1,204)
Items not affecting cash
Amortization of property, plant and equipment (excluding seedling containers) 595 611 1,779 1,850
Seedling container amortization included in costs of production 129 164 419 497
Amortization of intangibles 10 45 29 156
Loss on disposal of property, plant and equipment 162 17 283 92
Equity in loss (earnings) of investee (17) (21) (13) 6
Unrealized loss (gain) on foreign exchange (174) 32 (148) 171
Unrealized gain on interest rate swaps - - (64)
Provision for future income taxes 13 223 151 375 50
Unit option grants 14 85 26 185 71
55 (347) 3,595 1,626
Net change in non-cash working capital balances 17 1,333 2,011 3,066 4,400
1,389 1,664 6,661 6,025
Cash flows from financing activities
Repayment of long-term debt (27) - (127) (3,987)
Draw (repayment) of finance lease 13 37 (40) 3
Decrease in operating line - - (3,566)
Issuance of Trust Units 14 - 24 6 68
(14) 61 (161) (7,483)
Cash flows from investing activities
Repayment of loans by investee - - 20
Dividend from investee - 120 120
Purchase of property, plant and equipment (253) (361) (1,889) (1,392)
Cost of disposal of property, plant and equipment (50) (21) (68) (85)
Proceeds from disposal of property, plant and equipment 17 7 19 5,115
(286) (255) (1,938) 3,778
Increase in cash and cash equivalents 1,088 1,470 4,561 2,320
Cash and cash equivalents–beginning of period 3,565 850 92
Cash and cash equivalents–end of period $ 4,653 $ 2,320 $ 4,653 $ 2,320

Contact Information

  • PRT Growing Services Ltd.
    Tony Pollard
    VP Finance/CFO
    (866) 553-8733 ext. 229
    www.prt.com